Airline stocks quickly sold off, with United Airlines dropping 9.6 per cent and American Airlines falling 8.8 per cent.
“COVID had seemingly been put in the rear-view mirror by financial markets until recently,” Douglas Porter, chief economist at BMO Capital Markets. “At the least, (the virus) is likely to continue throwing sand in the gears of the global economy in 2022, restraining the recovery (and) keeping kinks in the supply chain.”
Even Bitcoin got caught up in the selling. The digital currency dropped 10 per cent over the weekend. At 5.20am AEDT, it is fetching $US53,823 ($75,556), according to Bitstamp.
One sign of Wall Street’s anxiety was the VIX, the market’s measurement of volatility that is sometimes referred to as its “fear gauge.” The VIX jumped 53.6 per cent to a reading of 28.54, its highest reading since January before the vaccines began to be widely distributed.
Fearful of more lockdowns and travel bans, investors moved money into companies that largely benefited from previous waves, like Zoom Communications for meetings or Peloton for at-home exercise equipment. Shares in both companies rose nearly 6 per cent.
The coronavirus vaccine manufacturers were among the biggest beneficiaries of the emergence of this new variant and the subsequent investor reaction. Pfizer shares rose more than 6 per cent while Moderna shares jumped more than 20 per cent.
Merck shares fell 3.8 per cent, however. While U.S. health officials said Merck’s experimental treatment of COVID-19 was effective, data showed the pill was not as effective at keeping patients out of the hospital as originally thought.
Investors are worried that the supply chain issues that have impacted global markets for months will worsen. Ports and freight yards are vulnerable and could be shut by new, localised outbreaks.
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“Supply chains are already stretched,” said Neil Shearing, an economist with Capital Economics in London. “A new, more dangerous, virus wave could cause some workers to temporarily exit the workforce, and deter others from returning, making current labour shortages worse.”
The variant also puts more pressure on central banks that are already faced with a dilemma: whether and when to raise interest rates to combat rising inflation. “The threat of a new, more serious, variant of the virus may be a reason for central banks to postpone plans to raise interest rates until the picture becomes clearer,″ Shearing said.
Stock trading the Friday after Thanksgiving is typically the slowest day of the year, with the market closing at 1 p.m. Eastern. However volume on Friday was much higher than it would typically be for a holiday-shortened day. Roughly 3.4 billion shares exchanged hands on the New York Stock Exchange, which is only modestly below the 4 billion shares traded on an average day.
AP
