Wall Street Breakfast: Omicron In America

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Omicron in America

The first Omicron case identified in the United States kicked selling into high gear on Wall Street yesterday. Stocks began the previous session sharply higher, but started to lose gains once Federal Reserve Chairman Jerome Powell reiterated that a faster Fed taper will be discussed at the next meeting.

The report of an Omicron variant case in California pushed stocks down sharply into the close. The S&P (SP500) has now seen its biggest two-day loss in 14 months, off a little more than 3%. Tech stocks have been particularly weak. This morning, S&P (SPX) (NYSEARCA:SPY), Dow (INDU) and Nasdaq 100 (NDX:IND) (NASDAQ:QQQ) futures point to a slightly higher open.

"In terms of developments about Omicron, we’re still in a waiting game for some concrete stats, but there was positive news early on from the World Health Organization’s chief scientist, who said that they think vaccines 'will still protect against severe disease as they have against the other variants,'" Deutsche Bank rates strategist Jim Reid says. "On the other hand, there was further negative news out of South Africa, as the country reported 8,561 infections over the previous day, with a positivity rate of 16.5%."

Growth takes it on the chin: The Nasdaq Composite (COMP.IND) has fared the worst among the major averages in this selloff, down 3.3% in the last two sessions. One reason for the extreme market reaction to the report of one case, when many were already assuming the variant would show up in the U.S. eventually, is the run stocks have been on this year. Stocks currently have very high valuations and investors may have been looking for a trigger for profit-taking.

When you compare the market reaction to that of other COVID waves and the Delta variant, what's different this time is that there was not a flight to Big Tech stocks, Florence Barjou, CIO at Lyxor Asset Management, said on Bloomberg. "This is really a growth-based selloff, which is why it looks a little bit like panic," Barjou says. "If we do get better news (on Omicron) we think it looks more like an entry point."

JPMorgan strategist Marko Kolanovic goes a step further and posits that Omicron could be the highly-transmissible yet milder variant that crowds out the more severe variants. "As such, we view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities and reopening themes, and to position for higher bond yields and steepening," he says.

Fed Factor: Also weighing on equities, especially growth stocks, is the presence of a newly-hawkish Fed chief. Rather than walking back comments about a faster tapering of asset purchases that hit Wall Street on Tuesday, Powell reiterated that it's time to discuss removing accommodation. "At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner," he said on Capitol Hill. "I expect that we will discuss that at our upcoming meeting."

When Omicron was first identified, markets pushed out the first Fed rate hike to December 2022, but have now returned to pricing in liftoff for June next year. Kinsale Trading says the Fed is getting ready to make a move that will be a "bearish gamechanger." (4 comments)

Apple’s iPhone issues

Apple (NASDAQ:AAPL) says it may not make up for missed holiday sales for the iPhone 13 caused by a lack of parts, Bloomberg reports. Supply chain issues have already forced the company to cut its 2021 iPhone 13 production target by 10M units.

Now it tells suppliers that demand for the phones has weakened, indicating that customers may just skip upgrading to the hard-to-find phones and not order next year when production increases, Bloomberg says, citing people familiar with the matter. (7 comments)

Snowflake surges

Beaten-down Snowflake (NYSE:SNOW) shares pop in extended-hours trading as the cloud-based data-management company reported better-than-expected third-quarter results and forecast stronger sales ahead.

Snowflake (SNOW) said that it lost 51 cents a share, on revenue of $334.4 million, for the quarter ending Oct. 31. During the same period a year ago, the company lost $1.01 a share on $159.6 million in sales. Wall Street analysts had forecast Snowflake (SNOW) to lose 61 cents a share on revenue of $306.1 million. It forecasts fourth-quarter product revenue of $345 million to $350 million, or nearly double that of the year-ago quarter. (25 comments)

Moderna booster in March?

A Moderna (NASDAQ:MRNA) executive said that the company could have a COVID-19 booster shot specific for the Omicron variant for regulators to review in March, Reuters reports.

President Stephen Hoge said that a shot that contains genes targeting the mutations found in the variant would be the best way to address any potential reduction in efficacy seen in current vaccines. (24 comments)

Trump SPAC looks to raise $1B

Trump-related SPAC Digital World Acquisition (NASDAQ:DWAC) rose in extended-hours trading on a report that it's working to raise up a $1B in a private investment in public equity or PIPE deal.

Trump Media & Technology Group is trying to raise as much as $1B in a PIPE transaction, according to a Reuters report. The additional funding would value the new entity at close to $3B. The original SPAC deal between Trump Media and DWAC valued Trump Media at $875M.

Trump Media is looking to secure a PIPE that would value DWAC close to its current share price of around $40/share, according to Reuters, which cited people familiar. Trump Media has asked investors to finalize commitments for PIPE investment by the middle of the month. (102 comments)

Robinhood at record low

Robinhood Markets (NASDAQ:HOOD) sank to its lowest level since going public four months ago, falling on heavy volume as the popular investing app’s IPO lockup fully expired.

Shares were apparently tanking due to the final and most significant in a series of lockup expirations that followed the company’s IPO. Some 569.7M shares bought at IPO by insiders and key investors like Salesforce (NYSE:CRM) became eligible for sale for the first time Wednesday. (13 comments)

Today's Markets

In Asia, Japan -0.65%. Hong Kong +0.55%. China -0.09%. India +1.35%.
In Europe, at midday, London -0.62%. Paris -0.71%. Frankfurt -1.01%.
Futures at 6:20, Dow +0.96%. S&P +0.77%. Nasdaq +0.45%. Crude +2.2% at $67.03. Gold -0.44% at $1775. Bitcoin -0.8% at $56589.
Ten-year Treasury Yield +5 bps to 1.439%

Today's Economic Calendar

Auto Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Fed's Bostic: "Why Is Housing So Expensive?"
10:30 EIA Natural Gas Inventory
11:00 Fed's Quarles Speech
11:30 Fed's Bostic Speech
11:30 Fed's Daly Speech
11:30 Fed's Barkin Speech
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

The trend is your friend -- what worked in November.

Disney (NYSE:DIS) names Susan Arnold chairman, as Bob Iger bows out at year end.

Square (NYSE:SQ) changing corporate name to Block; crypto operation to be named Spiral.

GSK (NYSE:GSK), Vir Bio's (NASDAQ:VIR) antibody retains activity against Omicron mutations.

Tesla (NASDAQ:TSLA) confirms that Austin is its headquarters now.

CrowdStrike Holdings (NASDAQ:CRWD) higher after third-quarter earnings, raised forecast.

Cathie Wood: Not in a bubble, and here's why she remains bullish on growth stocks.

Sweetgreen (NYSE:SG) sinks 15% to post-IPO low as salad chain gives back more of 101% first-day pop.

Dow (NYSE:DOW) guides for lower than expected Q4 EBITDA on higher costs, lower PE pricing.

Comments

[Doggywag]

And now it's all over. Yawn.

[value1m]

www.fool.com/...
👍1

[jadejet]

Here is something to think about. Twitter censored the American Heart Association which did a study that shows "the risk of developing heart conditions increases by 11-25% when mNRA vaccines (Moderna and Pfizer) are administered". Why are vaccine makers so afraid of facts? Think about it. I could list several studies that these vaccine makers try to block or remove from the public eye to advance their unscientific narratives. Why do so many good doctors and nurses refuse to participate and follow the Fauci doctrine leaving only those who follow it are able to work? We are being deceived like never before.

[value1m]

@jadejet risk and benefits

[value1m]

phas at low 2 s target price 10-20 after fda approval2

[john boy]

someone on commission over thwre I watch about 40 minutes per day mostly for the ticker

[Maverick 2021]

CNBC Half Time Report are using all its resources to get people to buy stocks day after day…

As the market continues to sink !!

[Jacobin777]

I'll listen to the science more than anyone/anything else. Yes, science is wrong at times, yes science changes as more data/information is known however science is what has gotten civilization/society where it is today.

[18214212]

@Jacobin777

Whose science do you listen to ?

[Jacobin777]

@18214212 I'm educated and trained as a scientist. I've worked in infectious diseases for a decade and have a number of co-authorship publications - including "The Journal of Critical Care Medicine ", "Cell", etc. What's your expertise?

I also follow (but not limited to) "Journal of Critical Care Medicine", "Nature", "Nature Genetics", "Science", "Journal of the American Medical Association, "FASEB", "New England Journal of Medicine," "British Medical Journal," "Lancet", "Science", "Journal of Infectious Diseases", "Journal of Virology" .

What do you follow? "Science & Medicine News" from Newsmax?

[18214212]

@Jacobin777

The question was posed to reveal the lack of consensus on science, not to engage in a credential-off. One can find numerous scientific "studies" to either support or reject many of the conclusions pushed by bureaucrats these days, and since the bureaucrats themselves have been routinely caught not following their own prescriptions for others or making themselves exempt from what they want to require others to take, in light of such hypocrisy it is only natural and reasonable to question not only their prescriptions/guidelines but also their motives. Surely an impressive-credentialed person as yourself thinks along such simple lines.

[Hadrian Archo]

1. 4th booster announced, and marketed with specialization to delta and omicron. Most people aren't aware the 3rd shot does nothing against delta variant, so they will respond with glee.

2. Pfizer will get the first EUA and approval for a 4th shot.

3. Moderna will follow suit a month or two later.

4. JnJ, AstraZeneca, and Novavax all unlikely to develop omicron specific booster. Moderna and pfizer already claim to be working on it. No news that Pfizer is changing formulation. Meaning they'll put out a jury rigged study claiming their current regiment is effective for omicron. Moderna announced they'll try to change the formulation of their vaccine, they'll confirm it by testing it on less than 10 people like they did with effectiveness against delta.

If Omicron has significant changes to the spike protein itself as people claim so far, then it'll likely be worse at giving disease. This is because too many changes can lead to ineffective cell entry via the spike-ACE2 interaction. The alternative outcome is that it's as bad as the other due to possible alternative mechanisms of entry that can form.

[Robert & Sam Kovacs]

The article says that the WHO states we're "still in a waiting game" concerning Omicron.

While this is true, it also means now is the time to consider Omicron's potential outcomes and impacts on the stock market.

We consider this in the latest article we published on Seeking Alpha.

"Omicron vs MMT: The biggest Stock Market Threat"

seekingalpha.com/...

Have a great day,

Rob & Sam from the Dividend Freedom Tribe

[dstb]

Once again focusing on cases regardless of how mild and insignificant. Only history will show how long this mass hysteria and panic can last.

[SB Pirate]

SPY is about 14 pts 3% away from filling the gap up on October 14th. QQQ is more like 26 pts. 6.7% At this time I would like to see the markets just get it over with. A crash open this morning would have been optimal imo but instead BTFD buyers show up so it appears the downside work will remain unfinished.
All a great day!

[newfruit]

Throw your PhDs in the trash! We got experts up to our ears!

Seriously though, I'm a dip buyer. If the latest variant proves inconsequential then the one after it won't have as much headline risk... rinse and repeat.

[VoiceofSanitySometimes]

@newfruit

"I'd rather be governed by the first 2000 people in the phone book than by the faculty of Harvard"
-- William F Buckley Jr (1961)

The man was 60 years ahead of his time...

[Culvero]

@VoiceofSanitySometimes Agreed, Here is a Ted talk citing Leadership by random selection as they did in Ancient Athens:

www.ted.com/...

…no need to point out that Athens had a limited selection pool for leadership…that dimension could modernized using current definitions for citizenship.

[john boy]

@VoiceofSanitySometimes
your awsome

[InvestorMan Sr.]

Omicron is less deadly. It’s milder than earlier variants. It’s less likely to put you in the hospital. Cary on!
I don’t expect Dr. Fauci to ever say that. He’s a scientist. He will say it “could” be worse. It “ might” be worse. So continue to mask up up and do as I say.
Facts. Schmacts. It’s not about what he knows to be true. It’s about what he “guesses” it “might” do. Even if it never does, it’s still possible. So…..

[New Adams]

@InvestorMan Sr. - Isn't this where we ALL are? Even you do not know the exact hour of your death.

[dstb]

@InvestorMan Sr.
Fauci is SCIENCE. Feed his god complex and obey him.

[User 28779875]

@New Adams It's different. Dr. Fauci's guesses dressed as a science are not helpful. He's more a politician than anything else.

[jimbo162]

We are talking about another "black swan" event....we don't have more than a few clues of what to expect. That individual found in California traveled from Africa...that plane had maybe 200 people that were exposed, all of them just celebrated Thanksgiving with family... Are they all being quarantined and monitored? I doubt it. It may now spread like a wildfire, or turn into nothing....we don't have much idea at this point.

[VoiceofSanitySometimes]

Delta variant was the beginning of the end of covid -- more transmissible and less virulent than the original. Omicron seems to be the middle of the end, even more transmissible and even less virulent. One more, and this will be the seasonal flu.

Omicron, at least based on what has been reported thus far, is a great Christmas gift.

So as covid as a "pandemic" nears its end, the big question is whether govts (in the US and all around the globe) will relinquish the power they've assumed during this period. Sadly, we all know the answer to that question.

As to the markets, this is a dip to be buying. 3-5x more upside potential here than downside over the next few months. Oil at $65 is pretty tempting too. GUSH? That would be a nice gain if it runs back to the high $70s.

[john boy]

@VoiceofSanitySometimes
based on my knowledge of immunology i have to aggree, not the end but the end of being a real problem

[Mo007]

Omicron will dominate and overwhelm the world in three to six months. Vaccines might slow down omicron but won’t be practical because of the transmissibility of the strain. Original covid had R knot of 1 transmission and initial data shows Omicron Has R knot of 2, if not more.

It is still going to take a few weeks for scientists to gather all the data they need to understand how the Omicron variant behaves. That means until then we will probably see conflicting reports about how transmissible and severe it is. Certainly Covid-lockdown sceptics have seized on reports that symptoms are very mild with this variant to suggest that the world has been over-reacting to its emergence.

However, a lot of people ill simultaneously, even with mild symptoms would be incredibly disruptive to society, so the transmissibility of the variant is a metric scientists are interested in over the next 3 weeks. The bottom line is.. can Omicron reinfect people who have already contracted a different strain of Covid-19 previously with symptoms. If the answer is “Yes”, expect the world to react very negatively, including the US. Considering vaccinations are still relatively low outside the western nations.

The Feds threats to taper quickly and raise rates will come to screeching halt if the above theory holds.

[millz1987]

@Mo007 "The Feds threats to taper quickly and raise rates will come to screeching halt if the above theory holds."

This is bullish though.. So... Hear me out here.. If Omicron is bad... that's bullish for equities?
Omicron = nothing burger? Bad for equities as the taper will proceed

[Mo007]

@millz1987 I think J Powell made it very clear that the next 2 weeks of data will be very important on what happens at the next FOMC meeting on Dec 15. We will have the jobs numbers tomorrow, the CPI, Omicron case count here in the US, CDC’s travel curbs today, supply chain data, etc. All are expected to be very sticky and likely to reverse the Feds pre-Omicron bullish plans.

[Phil Dumfee]

Government shutdown and debt ceiling will determine next Fed move. This administration makes lots of policy errors at every turn. Sell everything or at least dump half like the billionaires are doing.

[CaptainSpacebar]

It's a more transmissible but much less deadly virus? Hopefully the first step into a consistently more benign strain. ...I do appreciate the value of buying cheap stocks due to fear, but I resist lockdowns and forced mask mandates. COVID binds to your lungs and thrives in a lower oxygen environment. The exact thing that happens when you wear a mask.