Tuesday's Market Minute: Investors Attempt to Grapple With Severity of Omicron

The major indices reversed Monday’s gains this morning as investors continue sizing up the risks associated with the omicron COVID variant. The new variant, which has been found in several countries, sent several nations reverting to restricting travel to certain locations almost immediately. The World Health Organization deemed the new strain a “variant of concern” last Friday, causing markets to suffer their worst day in over a year and the CBOE volatility index to spike over 28. Despite that, the omicron variant’s symptoms have been described as “extremely mild” by the South African doctor who initially voiced concern over the strain. The WHO has said it will take a good deal of time to understand how the variant works with the therapeutics and vaccines currently in place.

Much of today’s weakness is attributed to Moderna MRNA CEO Stephane Bancel saying he expects vaccines to now be less effective against omicron. Bancel told the Financial Times that there could be a drop in the current vaccines’ effectiveness, and additionally told CNBC on Monday that it could take months to develop and ship a new vaccine for the strain. His sentiment was contrarian to Pfizer PFE CEO Albert Bourla, who said Pfizer’s oral antiviral was designed knowing that most mutations would come from spike proteins. Bourla said he believes it is more likely the current vaccines will be less effective, rather than not effective at all against the omicron strain. He also noted Pfizer will be able to deliver a new vaccine, if needed, in less than 100 days.

This volatility follows broader market strength after remarks from President Joe Biden, who said lockdowns are currently off the table and there will be no new travel restrictions. Fed Chairman Jerome Powell, on the other hand, said he believes the variant poses a threat to the bank’s mandate for stable pricing and maximum employment. Powell is expected to deliver these remarks to the Senate today.

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