Wall Street bounces back from Omicron, inflation jitters
Wall Street’s main indexes rebounded more than 1% on Wednesday as investors appeared to look past concerns over rising inflation and the new Omicron coronavirus variant, while shares of Merck rose on progress in approval of its COVID-19 pill.
Merck & Co Inc (MRK.N) gained 1.9% after a panel of advisers to the U.S. Food and Drug Administration narrowly voted to recommend the agency authorize the drugmaker’s antiviral pill to treat COVID-19.
All of the 11 major S&P sectors advanced in a broad-based rally, with energy (.SPNY) and utilities (.SPLRCU) shares jumping more than 2% each.
Banks (.SPXBK) added 1.7%, recouping some losses suffered in the previous session.
Shares of mega-cap technology titans Amazon.com (AMZN.O), Apple Inc (AAPL.O), Tesla Inc (TSLA.O), Google owner Alphabet Inc (GOOGL.O) and Microsoft Corp (MSFT.O), which are favored at times of uncertainty, added between 0.8% and 2.5% to provide the biggest boost to S&P 500 and the Nasdaq.
“People are just confident in the earnings predictability of tech stocks,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
In a hearing before the House Committee on Financial Services, Federal Reserve Chair Jerome Powell reiterated his comments from Tuesday about considering the acceleration of taper at the central bank’s December meeting amid a surge in inflation and a stronger economy.
Powell said the Fed’s two goals of price stability and jobs recovery are in tension and that it will use tools to make sure high inflation does not become entrenched.
U.S. stocks slumped on Tuesday after Powell’s hawkish tone served as a double whammy for markets, which were already nervous about the spread of the Omicron variant and its potential to hinder a global economic recovery.
“We’re seeing uncertainty manifest with a high level of volatile price action, as investors get their heads around what Powell’s comments mean, and keeping their finger on the pulse of Omicron,” Bakhos said.
Market participants were also awaiting a Fed report, known as the “Beige Book”, on current economic conditions to provide further insight into the central bank’s stance on inflation. The report is due at 2:00 p.m. ET (1900 GMT).
The World Health Organization expects to have more information on the transmissibility of the Omicron variant within days, and that the agency believes the existing COVID-19 vaccines will work against the variant.
At 11:57 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 355.41 points, or 1.03%, at 34,839.13, the S&P 500 (.SPX) was up 66.83 points, or 1.46%, at 4,633.83, and the Nasdaq Composite (.IXIC) was up 189.11 points, or 1.22%, at 15,726.80.
Meanwhile, separate data showed U.S. private employers maintained a strong pace of hiring in November, while factory activity (USPMI=ECI) rose slightly as input prices eased, new orders gathered steam and the employment situation improved marginally.