S&P 500 Has Worst Two-Day Rout Since October 2020: Markets Wrap

(Bloomberg) -- Stocks suffered their worst back-to-back rout since October 2020 as Jerome Powell reiterated his pivot toward being vigilant against inflation and the omicron variant continued to spread, with the U.S. confirming its first case.

In a very volatile session, the S&P 500 erased gains after climbing almost 2% earlier Wednesday. It was the biggest reversal since April 2020 amid strong trading volume. The Russell 2000 Index of small caps sank about 2.5%. Airlines, cruise operators and hotels also slumped. Investors flocked to the relative safety of Treasuries, with the yield on the 30-year note near 1.75%.

South Africa said Covid-19 cases almost doubled from Tuesday, with the new strain popping up in the U.K., Switzerland and Brazil. The World Health Organization's chief scientist noted that vaccines will likely protect against severe cases of the variant. Traders also assessed comments from Federal Reserve Chair Jerome Powell, who reinforced his message that the central bank would keep inflation in check and that officials should consider speeding up how quickly they withdraw support.

“‘Shutdown risk' is the main reason, but there's more at work,” wrote Adam Crisafulli, the founder of Vital Knowledge. “The rally this morning never had a lot of conviction behind it, and investors are still trying to sort through not just omicron but the Fed's new reaction function too.” 

The economy grew at a modest to moderate pace through mid-November while price hikes were widespread amid supply-chain disruptions and labor shortages, the Fed said in its Beige Book. Confidence among chief executive officers of large U.S. companies jumped to an all-time high, a measure of manufacturing rose in November, and data suggested employers continued to chip away at filling a near-record number of open positions.

Some corporate highlights:

• Moderna Inc. sank after losing an appeal of a patent ruling involving a rival's drug-delivery technology, which could make its Covid-19 vaccine vulnerable to infringement suits.
• Salesforce.com Inc. slumped after the top maker of cloud-based customer-relations software gave revenue and profit forecasts that fell short of estimates.
• General Motors Co. expects to earn about $14 billion in pre-tax profit this year, more than its previous guidance to Wall Street analysts, its chief financial officer said.

Key events to watch this week:

• OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday
• U.S. initial jobless claims, Thursday
• U.S. jobs report, factory orders, durable goods on Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.2% as of 4 p.m. New York time
• The Nasdaq 100 fell 1.6%
• The Dow Jones Industrial Average fell 1.3%
• The MSCI World index fell 0.3%
• The Russell 2000 Index fell 2.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.2% to $1.1314
• The British pound fell 0.3% to $1.3264
• The Japanese yen rose 0.3% to 112.82 per dollar

Bonds

• The yield on 10-year Treasuries declined three basis points to 1.42%
• Germany's 10-year yield was little changed at -0.34%
• Britain's 10-year yield advanced one basis point to 0.82%

Commodities

• West Texas Intermediate crude fell 1.7% to $65.07 a barrel
• Gold futures rose 0.3% to $1,781.70 an ounce

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