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Stocks End Sharply Lower as Covid, Options Expiration Take Toll

Stocks fell Friday, ending the week on a sour note for bulls as fears of a new wave of Covid and a quarterly expiration of options combined to send shares lower.

U.S. ended lower Friday afternoon as the S&P 500 extended declines that have wiped out all of the gains posted after this week's Fed policy decision amid growing fears of a new Covid wave.

The Dow Jones Industrial Average fell 532, or 1.5%, to 35,365. The S&P 500 ended off 48, or 1%, at 4,621.  The Nasdaq Composite ended off 11, or 0.1%, at 15,170.

The Russell 2000 index of small-cap stocks bucked the trend, gaining 1% for the day.

This week's stock market volatility is being driven by "a perfect storm of factors, including negative Omicron headlines, the emergence of a more hawkish Federal Reserve and profit taking in mega-cap tech stocks," said Robert Schein, chief investment officer at Palm Desert, California-based Blanke Schein Wealth Management. "Passive investors are the most at risk right now, as this is a stock picker's market and investors should be more discerning in what they buy."

The stark reality of a winter Covid wave is starting to find its way into the market's consciousness. President Joe Biden has warned of a "winter of severe illness and death" for the unvaccinated.

New infections are sweeping through the sports world, cancelling games and putting star players on the sidelines. And Wall Street banks are sending workers home, while cancelling Christmas events.

Bank of America's weekly 'Flow Show' report indicates a $31.6 billion boost in equity inflows, the largest in three months, suggesting investors are positioning for an early 2022 rally now that major central bank decisions -- including the Fed, the Bank of England and the European Central Bank -- are out of the way.

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Friday market volatility may also be affected by the so-called quadruple witching hour, where futures and options on both single stocks and indices expire heading into the close of the quarter.

Benchmark 10-year Treasury note yields slipped to 1.40% in New York trading.

FedEx shares rose $11.80, or 5%, to $250.32 after the world's biggest package delivery company posted stronger-than-expected second quarter earnings while bringing back its earlier 2022 profit forecast. 

Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report shares, meanwhile, slumped 2.8% after the U.S. Centers for Disease Control and Prevention recommended vaccines made by Pfizer  (PFE) - Get Pfizer Inc. Report and Moderna  (MRNA) - Get Moderna, Inc. Report over its single-dose offering. 

General Motors  (GM) - Get General Motors Company Report shares fell 5.5% after the carmaker lost a key executive in its self-driving car subsidiary, while Rivian  (RIVN) - Get Rivian Automotive, Inc. Class A Report fell 10% following the EV-maker's third quarter loss and muted delivery outlook.

Cerner Corp.  (CERN) - Get Cerner Corporation Report shares, meanwhile, surged 13%  after the Wall Street Journal reported that Oracle  (ORCL) - Get Oracle Corporation Report is preparing to buy the electronic medical records company in a deal worth as much as $30 billion.

U.S. oil prices fell amid demand concerns linked to the spread of the Omicron variant and a stronger U.S. dollar.