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Dow Closes 650 Points Down on Omicron Fears, Hawkish Powell Testimony

Stocks end down amid concerns about the omicron variant and hawkish comments on rates and inflation from Fed Chair Jerome Powell.
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Stocks finished sharply lower Tuesday amid concerns about the omicron variant of Covid-19 and comments by Federal Reserve Chairman Jerome Powell who said it may be time to retire the word "transitory" when it comes to consumer price increases.

The Dow Jones Industrial Average was down 652 points, or 1.86%, to 34,483, while the S&P 500 was off 1.9%, and the Nasdaq lost 1.55%.

Powell told the Senate Banking Committee -- along with Treasury Secretary Janet Yellen -- that he thinks it's time to retire the word "transitory" when it comes to consumer price increases. 

He also suggested he could "wrap up" tapering a few months early as inflation remains elevated.

"Markets, which were already jittery on omicron fears, were shocked by comments during Fed Chair Powell’s testimony that the Fed were looking at speeding up the timeline on taper to better be able to combat inflation that may not be so 'transitory' after all," said Cliff Hodge, chief investment officer for Cornerstone Wealth.

Equities sold off hard, Hodge added "while the yield curve did what it historically does during tapering and quantitative tightening (QT) cycles, which is bear flatten."

"Investors should be thinking about using the volatility to make some rotations in their portfolios, namely rotating out of cyclicals, and into higher quality growth names that produce actual cash flows today," Hodge said.

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Ryan Detrick, chief market strategist for LPL Financial, said "Powell just added gasoline to the fire by finally admitting that inflation isn't going away as fast as anyone would like."

"A faster tapering is probably coming as a result and that has markets worried the punch bowl is leaving the party," Detrick said. "Oh, and the latest omicron news is the cherry on top of a bad news day."

Meanwhile, The Conference Board said on Tuesday its consumer confidence index fell to a reading of 109.5 this month from 111.6 in October. 

The survey was conducted before the discovery of Omicron. Economists polled by Reuters had forecast the index falling to 111.

In company news, Moderna  (MRNA) - Get Moderna, Inc. Report shares ended down 4.4% after CEO Stephane Bancel warned in an interview with the Financial Times that the drugmaker's existing vaccine would likely experience a "material drop" in effectiveness against the new Omicron variant, compared to the Delta strain, and noted that any new vaccine would likely take months to develop, manufacture and deliver.

Regeneron Pharmaceuticals  (REGN) - Get Regeneron Pharmaceuticals, Inc. Report shares fell 2.7% after the company said its Covid antibody treatment -- used to treat former President Donald Trump -- may be less effective against the Omicron variant, noting that there may be "reduced neutralization activity of both vaccine-induced and monoclonal antibody- conveyed immunity

ImmunoGen  (IMGN) - Get ImmunoGen, Inc. Report shares soared nearly 30% after the cancer drug specialists said its ovarian cancer treatment met the primary goals of a late-stage study.