Again, strong losses of more than 1% for each of the major indices are being quickly followed by green arrows across the board.
Ending Tuesday’s session higher would mean a three-day streak of defeat for all three benchmarks.
But things are not too serious in the market: all indices are on track to make a decent profit this year. Both the Dow and the S&P will surpass last year’s performance.
But having said that, the catalysts that are lowering stocks on Monday are still present:
The losses came after the rise in Covid cases, as the Omicron variant is hitting Europe and the United States, where governments have responded by tightening restrictions.
On Tuesday, the U.S. Centers for Disease Control and Prevention suggested that Omicron cases are likely to cause higher infection rates than we’ve seen with previous peaks.
While this may be reminiscent of the rise in the summer Delta case, some analysts are betting that the spread of Omicron may be less severe.
“This Covid strain appears to be much weaker in severity than the Delta strain, even if it is more transmissible,” analysts at Bespoke Investments said. And that would mean less economic disruption.
On top of that, there is a drama in Washington after Democratic Sen. Joe Manchin said he would oppose President Joe Biden’s $ 1.75 trillion “Build Back Better” bill.
A lower trading volume in the last weeks of the year may also mean that market movements will intensify. Therefore, more volatility could be expected.
“Investors may be entering a speculative mood,” said JJ Kinahan, chief market strategist at TD Ameritrade.
“In addition, cryptocurrencies that have recently been correlated with ‘risk over’ investments are also experiencing a rebound.”
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