Investors may want to refrain from checking their portfolios today, as the S&P 500 closed down 1.9%, while the Nasdaq 100 closed down 1.55%. Fears of the new omicron variant, along with potential early tapering moves by the Federal Reserve, are sending shivers down Wall Street’s spine. All together, these factors have investors asking: Why are stocks down today?
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Let’s take a deeper look into what exactly is causing the market to sell off.
Why Are Stocks Down Today?
- The main factor for the selloff may be attributable to the omicron variant. Countries like Japan, Israel and Morocco have already closed their borders to foreigners in anticipation of an uptick in coronavirus cases. Australia announced on Monday that it would delay its plan to open its borders to international students and skilled migrants by two weeks.
- Another factor comes from the Federal Reserve Board Chair Jerome Powell. In a statement to the Senate Banking Committee, Powell said that given the economic backdrop, it would be appropriate to possibly speed up the tapering process. More specifically, Powell reiterated that the Fed may “consider wrapping up the taper of our asset purchases… perhaps a few months sooner.” The Fed started its tapering process earlier this month, winding down asset purchases by $15 billion per month. Based on that current rate, tapering should end by mid-2022. The next Fed meeting to discuss monetary policy and tapering will be Dec. 14-15.
- Fears of inflation are also running rampant. Powell divulged that the risk of persistently higher inflation has grown since the beginning of the year. He also noted that higher inflation may not subside until mid-2022. James Bullard, president of the St. Louis Fed, said that the Fed wants to be in a position to raise rates by mid-2022 if inflation persists. Bullard reasoned that he sees a 50% chance that inflation will persist without further Fed action.
- A dire warning from Moderna’s (NASDAQ:MRNA) CEO may have spooked investors as well. Stéphane Bancel noted that current vaccines may be less effective when dealing with the omicron variant. Bancel added that the effectiveness of current vaccines may see a “material drop,” and that scientists he has consulted with have expressed concerns that the omicron situation is “not going to be good.” Regeneron’s (NASDAQ:REGN) president, Dr. George Yancopoulos, added that the company won’t be able to conclude the effectiveness of its treatment on the omicron variant without further data that should come in a few weeks. As of now, the company is testing alternative antibodies to combat the omicron variant.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
