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Dow futures drop 450 points after Moderna CEO predicts vaccines will be less effective against Omicron

Markets Insider
Markets Insider
 2021-11-30

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Analysts said stocks are set for volatility over the coming weeks.
  • Dow futures fell 450 points Tuesday after Moderna's CEO predicted vaccines would be less effective against the Omicron coronavirus strain.
  • European stocks, oil and crypto also fell as investors ran for safe-haven assets such as government bonds.
  • Analysts said they expect volatility to remain high over the coming weeks as scientists learn more about Omicron.

US stock market futures tumbled Tuesday, after the CEO of Moderna told the Financial Times he doubts existing vaccines will be as effective against the new Omicron coronavirus strain.

Dow Jones futures were down 1.28%, or 449 points, as of 5.45 a.m. ET, putting stocks on track to reverse the gains seen the previous day.

S&P 500 futures fell 1.01%, or 48 points, while tech-heavy Nasdaq 100 futures slipped 0.35%, or 56.75, cushioned by investors liking the look of so-called stay-at-home stocks.

Investors ran toward safe-haven assets, pushing up the prices of government bonds and pushing yields lower. The yield on the key 10-year US Treasury note fell 10 basis points to 1.427%.

US futures and European stocks began to fall sharply after the FT published its interview with Stephane Bancel, in which the Moderna boss said "there is no world" in which vaccine effectiveness is the same against Omicron as against the Delta variant.

The pharmaceutical company's CEO said it's likely to take months for vaccine-makers to develop and distribute large numbers of effective shots.

The comments sparked fears the Omicron variant could lead to new lockdowns and travel bans around the world, which could derail the global economy's recovery.

"Market participants are currently fearful of the worst case scenario, that Omicron could become the dominant strain, cause more serious side effects, and reduce vaccine efficacy that would result in a larger slowdown in global growth next year," MUFG's Lee Hardman said.

The Japanese bank's currency analyst said he expects investors "to remain more cautious about risk-taking until there is greater clarity over the potential impact from the new Omicron variant."

European stocks fell Tuesday, with the continent-wide Stoxx 600 down 1.37%, and London's FTSE 100 1.23% lower.

Asian stocks dropped overnight, with Tokyo's Nikkei 225 index closing 1.63% lower. Hong Kong's Hang Seng fell 1.58%.

Stocks, which were trading close to record highs last week, suffered an initial Omicron-driven sell-off Friday before rebounding somewhat Monday.

Scientists are racing to learn more about Omicron, and the World Health Organization has said "more information will emerge in the coming days and weeks."

Investors will watch central banks closely for any sign they could now be forced to maintain support for economies longer than expected.

"The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation," Federal Reserve Chair Jerome Powell said in prepared comments ahead of a Senate appearance Tuesday alongside Treasury Secretary Janet Yellen .

Elsewhere, oil prices slid as the Omicron situation put a dampener on the demand outlook. Brent crude was down 3.73% to $70.47 a barrel, while WTI crude was 3.57% lower at $67.47 a barrel.

OPEC is due to meet Thursday, when it is expected to say whether it will pause supply increases.

The dollar index fell 0.66% to 95.70, while gold and the Japanese yen rose as investors sought safety. Bitcoin fell 0.4% to $57,046 on the Bitstamp exchange.

Christian Keller, head of economics research at Barclays, said in a note: "Answering [key] questions [about Omicron] may take weeks, which could mean elevated uncertainty for the remainder of the year.

"One worst-case scenario involves the entire immunization process having to start from scratch, while the most benign outcome would be the discovery that 'Omicron' is neither much more transmissible, nor deadly than earlier variants and that existing vaccines are effective against it."

Read more: Veteran investor Joel Greenblatt shares 6 tips for playing a pocket of the market ripe with opportunities right now — and lays out his thesis on a major upcoming special situation

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