Investors are cautiously looking at what impact the new Omicron variant of Covid-19 may have on stocks in the coming week after the markets sharply declined on Friday on news of the virus spreading in South African and European countries.
On Wall Street Friday, stocks fell sharply in a holiday-shortened Black Friday session. The Dow closed down 905 points, or 2.5%, at 34,899, while the S&P 500 ended down 2.3% and the Nasdaq closed 2.2% lower. Also on Friday, the CBOE Volatility Index VIX, also known on Wall Street as the "Fear Gauge" spiked to a 10-month high.
But in a glimmer of good news on Sunday, U.S. stock futures started the week slightly higher. Dow futures were up o.53%; S&P futures were 0.80% higher and Nasdaq futures climbed about 1%.
Don’t miss our Cyber Monday 24-hour sale: Sign up for our Action Alerts PLUS investment club and get the trading strategies and investing ideas from Real Money’s expert contributors for free.
On Friday, Deutsche Bank Research Analyst Jonathan Jayarajan said in a note, "there has been a substantial market reaction, with travel-related stocks in particular having been heavily affected," Kiplinger reported. "That comes as countries have moved to tighten restrictions, with the U.K. already adding six countries to its red list, and European Commission President von der Leyen proposing that the emergency brake be activated to stop air travel from southern Africa."
President Joe Biden on Friday ordered air travel restrictions from South Africa, Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi, which take effect Monday.
In addition to South Africa, the Omicron variant has been detected in Australia, Austria, Belgium, Botswana, Denmark, Germany, Hong Kong, Israel, Italy, Netherlands and the U.K.
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and White House chief medical adviser, on Sunday said on ABC's "This Week" that the Omicron variant will inevitably make its way to the U.S.
"We all know when you have a virus that has already gone to multiple countries, inevitably it will be here," Fauci said. "The question is, will we be prepared for it."
The World Health Organization on Friday classified the Omicron variant, B.1.1519, as a "variant of concern." On Sunday, WHO issued an update advising that it is not yet clear whether Omicron is more transmissible compared to other variants. The organization also said that while the number of people testing positive for Omicron has risen in areas of South Africa, epidemiological studies are underway to understand if it is because of the virus or other factors.
WHO also said it is not clear yet whether Omicron infection causes more severe disease compared to infections with other variants, including Delta. It said preliminary evidence suggests there may be an increased risk of reinfection with Omicron as compared to other variants.
The organization is studying the effectiveness of vaccines and treatments on Omicron and said that current PCR tests are effective in detecting Omicron infection.
No cases of the variant had been identified in the U.S., according to a Centers for Disease Control and Prevention statement.
The CDC on Friday said it is following details of the Omicron variant, which was first reported to the WHO by South Africa government officials.
"We are grateful to the South African government and its scientists who have openly communicated with the global scientific community and continue to share information about this variant with the U.S. Department of Health and Human Services and CDC," the CDC said in a Friday statement. "We are working with other U.S. and global public health and industry partners to learn more about this variant, as we continue to monitor its path."