December 4, 2022

Tricia Oak

Business & Finance Excellency

Dow posts biggest single-day drop this year as new COVID-19 variant triggers market sell-off

U.S. stocks suffered from some of the biggest single-day declines of the year on Friday as a new, fast-spreading COVID-19 variant detected in South Africa triggered fresh fears that a resurgent coronavirus could scuttle the global economy’s recovery from the pandemic. 

The Dow Jones Industrial Average – after briefly falling more than 1,000 points – ended the day down 905 points, or 2.5%, for its worst drop of the year, while the S&P 500 fell 2.27%, its worst day since February. The Nasdaq Composite dropped 2.23% in the shortened trading session on Friday (U.S. markets close at 1 p.m. ET due to the Thanksgiving holiday.) 

The drop comes after health officials warned of a new variant found in South Africa that has a high number of mutations and has spread quickly among young people. The World Health Organization is due to meet Friday to discuss whether the strain is a concern and to determine whether to give it a name from the Greek alphabet. 

“The new variant news has brought with it a sell first and ask questions later mentality,” said Ryan Detrick, chief market strategist for LPL Financial.
 

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 35135.94 +236.60 +0.68%
SP500 S&P 500 4655.27 +60.65 +1.32%
I:COMP NASDAQ COMPOSITE INDEX 15782.834136 +291.18 +1.88%

The economic impacts of the new strain – which has been found in Hong Kong, Belgium and Israel, as well as South Africa – were already being felt on Friday, with at least 10 European nations suspending air travel from southern Africa. The 27-nation European Union also recommended an “emergency brake” on travel from southern Africa, citing the “very concerning” new variant.

Airline stocks quickly sold off, with Delta Air Lines, United Airlines and American Airlines falling nearly 9% each. 

Ticker Security Last Change Change %
DAL DELTA AIR LINES, INC. 36.24 -0.14 -0.38%
UAL UNITED AIRLINES HOLDINGS, INC. 42.54 +0.28 +0.66%
AAL AMERICAN AIRLINES GROUP, INC. 17.74 -0.01 -0.06%

“The economic recovery has been quite impressive, and the one thing that could knock it over completely would be a more dangerous variant,” Detrick said. “Time will tell how worried we should be, but investors are selling in front of potential bad news.”

Some European countries already tightened anti-virus controls this week after their own case numbers spiked. Austria imposed a 10-day lockdown, while Italy restricted activity by unvaccinated people. Americans were advised by their government to avoid Germany and Denmark.

BEST PLACES TO SHOP BLACK FRIDAY

Ticker Security Last Change Change %
USO UNITED STATES OIL FUND L.P. 50.17 +0.54 +1.09%

Oil prices also fell sharply, plunging nearly 11% to about $69.93 per barrel, its worst day since April 2020. International benchmark Brent crude futures slid 9.9%, or $8.37, to $73.85 per barrel amid fresh fears of another slowdown in the global economy. 

Vaccine-makers were the early winners in Friday’s sell-off, with shares of Pfizer, Moderna and BioNTech all up. Johnson & Johnson was down. While it was not immediately clear how effective the vaccines were against the new variant, mRNA vaccines – such as those developed by Pfizer and Moderna – can be easily updated. 

Pfizer was on pace to close at an all-time high, based on data dating back to January 1972, while Moderna was poised for the largest percent increase since March 2020. 

Ticker Security Last Change Change %
PFE PFIZER INC. 52.40 -1.60 -2.96%
BNTX BIONTECH SE 362.52 +14.52 +4.17%
MRNA MODERNA, INC. 368.51 +38.88 +11.80%
JNJ JOHNSON & JOHNSON 159.75 +0.55 +0.35%

Investors – worried about renewed business restrictions and travel bans – shifted money into so-called “stay-at-home” stocks that have benefited from lockdown measures throughout the pandemic, such as Zoom Communications for office meetings from home and Peloton for at-home workout equipment. 

One sign that investors were increasingly skittish is the Cboe Volatility Index, known as Wall Street’s “fear gauge,” which rose nearly 45% to 26.92, its highest level in months. 

Ticker Security Last Change Change %
ZM ZOOM VIDEO COMMUNICATIONS, INC. 218.98 -1.23 -0.56%
PTON PELOTON INTERACTIVE, INC. 44.39 -2.02 -4.35%
NFLX NETFLIX, INC. 663.84 -1.80 -0.27%