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US shares are lower on the first trading day of the new week. The S&P 500, Nasdaq 100 and Dow all down more than 1.0% on the session. Shares’ performance comes amid fears about the rapid spread of the Omicron.
The S&P 500 gapped below the 4600 level on Monday and has since dropped all the way below the 4550 mark where it trades lower on the day by about 1.8%.
Key market drivers of risk-off on Monday include an escalation of the Covid-19 situation in Europe. In a surprise move, the Netherlands on Sunday announced a full lockdown.
Other countries are expected to follow suit straight after Christmas. The UK is rumoured to be planning a lockdown from 27 December. US markets are clearly worried that the US is headed in the same direction as Europe.
Sentiment in the US was dealt a further blow by news over the weekend that moderate Democrat Senator Joe Manchin would oppose the Biden administration’s USD 1.75T Build Back Better (BBB) social spending package.
Another factor being cited as weighing on sentiment is the hawkish signals sent from the Fed in recent days. Recall last week that the Fed doubled the pace of its QE taper, which Fed member Christopher Waller said on Friday indicated that the March meeting was live for a rate hike.
The Fed’s new dot plot pointed to three rate hikes in 2022, so support for a March lift-off is unlikely to be far from the bank’s consensus view.
Some traders expressed hope on Monday that if Omicron gets really bad in the US and more Congress fails to pass further fiscal stimulus, the Fed might delay their tapering plans.
