Markets mixed, COVID-19 threatens US hospitals and chip supply

Markets were mixed on Thursday.

The S&P 500 fell 0.3 percent but the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Nikkei 225 fell 0.4 percent but the Shanghai Composite rose 0.6 percent.

The surge in COVID-19 infections continue around the world, with some hospitals in the US reporting packed emergency rooms as the country hit a new pandemic high of 300,886 average new daily cases over the week to Wednesday.

“What we're experiencing right now is an absolute overwhelming of the emergency departments” in Washington, said Dr James Phillips, chief of disaster medicine at George Washington University Hospital.

Meanwhile, an outbreak of COVID-19 infections in the Chinese city of Xi'an could aggravate a global chip shortage. Samsung and Micron reported on Wednesday that they have had to adjust operations in the city after authorities enacted a stringent lockdown.

Markets mixed amid inflation fears and COVID-19 surge

Markets were mixed on Wednesday.

The S&P 500 edged up 0.1 percent to close at another record high. However, the STOXX Europe 600 dipped 0.1 percent and the Nikkei 225 fell 0.6 percent.

“The seasonals favor further gains in the market,” said Wells Fargo Investment Institute’s Gary Schlossberg.

A CNBC survey showed that investors fear inflation most in 2022.

Meanwhile, COVID-19 also remained a concern as the US confirmed more than 4.5 million cases this month.

Dr Anthony Fauci said on Wednesday that the latest wave of the pandemic may hit its peak in the US by the end of January.

However, the World Health Organization warned on Wednesday that new coronavirus variants could emerge during the pandemic that render the current vaccines useless.

Omicron surge could be most devastating one yet

Markets rose on Monday, with the S&P 500 gaining 1.4 percent to close at a record high.

Markets rose even as many countries are implementing new restrictions to stem the rise in Omicron infections.

“We do not expect Omicron to impact the growth outlook in any significant way, but rather it is likely to accelerate the end of the pandemic,” said JPMorgan’s Dubravko Lakos-Bujas in a note.

Still, the virus could cause a lot of problems before the pandemic comes to an end.

A report from researchers at the COVID-19 Modeling Consortium at the University of Texas, Austin showed that the Omicron surge could be the most devastating one yet in the US.

“Across all scenarios we expect to see cases that are at least as high as the Delta surge in September 2021, but that would be the minimum,” said Lauren Ancel Meyers, director of the UT consortium. “At a maximum we could see a surge in cases that is even higher than our January 2021 surge, which would make it the biggest national surge seen to date.”

Investors take “sunnier view” despite rise in Omicron cases

The S&P 500 rose 2.3 percent last week as investors turned optimistic towards the year end.

“I think all the things we’ve been concerned about for the month of December to a certain extent, are in the rearview mirror,” said Art Hogan, chief market strategist at National Securities.

“Whereas the market was focusing on everything that could go wrong since Thanksgiving, people are now just taking a sunnier view,” said Paul Hickey, co-founder of Bespoke Investment Group.

Studies showing that the Omicron variant may be milder than other variants of the coronavirus has fed the optimism, although US infectious disease expert Dr Anthony Fauci warned against complacency.

Fauci told ABC on Sunday that infections “go up and up” every day and “we don't want to get complacent” because “when you have such a high volume of new infections, it might override a real diminution in severity”.

S&P 500 hits record high, hope for Santa rally

Markets rose on Thursday.

The S&P 500 rose 0.6 percent to a record high, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 0.8 percent.

Jim Paulsen, Leuthold Group’s chief investment strategist, said that “dip-buyers not wanting to miss out on a Santa Rally have taken charge”.

Investors were also encouraged by news that the Omicron variant of the COVID-19 virus is less likely to result in hospitalisation than earlier strains.

Investors “increasingly bullish”, COVID pandemic end seen

Markets rose on Wednesday, with the S&P 500 gaining 1 percent.

Chris Hussey, a managing director at Goldman Sachs, said that “markets appear to finally be calming down” as the “triple headwinds of rising virus cases, a more hawkish Fed, and elusive fiscal stimulus are absorbed into risk-asset prices”.

“The news flow is negative in the near-term as the Omicron wave causes economic and corporate earnings dislocations, but investors are increasingly bullish looking out beyond the next few weeks,” said Adam Crisafulli, founder of Vital Knowledge.

Indeed, some experts see the fast-spreading Omicron variant of the COVID-19 virus actually hastening the pandemic's end by building natural immunity among the population that could help protect against Covid’s next variant of concern.

“As all the public health folks have been saying, it’s going to rip right through the population,” said Dr David Ho, a world-renowned virologist and Columbia University professor. “Sometimes a rapid-fire could burn through very quickly but then put itself out.”

Markets rise, Omicron to push health systems “to the brink”

Markets rose on Tuesday.

The S&P 500 jumped 1.8 percent, the STOXX Europe 600 rose 1.4 percent and the Nikkei 225 surged 2.1 percent.

“The market seems to be reacting to a short-term oversold position,” said Timothy Lesko, principal at Granite Investment Advisors. “If omicron-induced illness remains mild, which seems to be of some debate, we could see a rally.”

Mark Hackett, Nationwide’s chief of investment research, said that “increased volatility and thinner trading volumes could cause the market to overreact, which could be a buying opportunity in the run-up to Christmas”.

Meanwhile, though, the Omicron variant of the COVID-19 virus continues to be a threat to the world.

Data published on Monday by the Centers for Disease Control and Prevention show that the Omicron variant is now the dominant COVID-19 strain in the US, representing 73 percent of sequenced cases.

In Europe, Hans Kluge, the World Health Organization's top official in the continent, warned that Omicron will dominate in more countries of the region, “pushing already stretched health systems further to the brink”.

And while leaders have pushed the people in their countries to get vaccinated against COVID-19, a report in the New York Times said that research so far suggests that the vaccines used in most of the world offer almost no defense against becoming infected by the Omicron variant.

“[O]nly the Pfizer and Moderna shots, when reinforced by a booster, appear to have initial success at stopping infections, and these vaccines are unavailable in most of the world,” the report said.

“The other shots — including those from AstraZeneca, Johnson & Johnson and vaccines manufactured in China and Russia — do little to nothing to stop the spread of Omicron, early research shows.”

Omicron restrictions loom

The S&P 500 fell 1.9 percent last week.

Still, Paul R La Monica at CNN noted that the “S&P 500 is up 23% this year and is just a little more than 1% from its record high”.

This is despite the rise of the Omicron variant of COVID-19 around the globe raising the possibility that countries may have to implement new lockdowns, a possibility that, he wrote, “might not be priced into the broader stock market just yet”.

Indeed, the Netherlands entered a strict new lockdown Sunday in response to fears over the spread of Omicron.

Meanwhile, in the UK, Health Secretary Sajid Javid said on Sunday that he could not rule out restrictions before Christmas while London Mayor Sadiq Khan said that new COVID-19 restrictions were “inevitable”.

In the US, businesses are already reacting to the spread of Omicron.

“Some Broadway shows in New York City have been canceled,” wrote La Monica. “And companies ranging from Apple and Ford to ridesharing firm Lyft and investment bank Jefferies have recently announced plans to delay workers' return to the office. More businesses are likely to follow suit.”

Omicron "a major, imminent threat to public health"

Markets fell on Friday.

The S&P 500 fell 1.0 percent, the STOXX Europe 600 fell 0.6 percent and the Nikkei 225 plunged 1.8 percent.

Worries over the Omicron variant continued to weigh on markets.

A study by Imperial College London showed that the risk of reinfection with the Omicron variant is more than five times higher and it has shown no sign of being milder than Delta.

The study also showed that the effectiveness of vaccines is reduced against the Omicron variant compared to Delta, suggesting that the "level of immune evasion means that Omicron poses a major, imminent threat to public health".

BoE hikes rates, ECB cuts bond purchases

Markets were mixed on Thursday.

The S&P 500 fell 0.9 percent but the STOXX Europe 600 jumped 1.2 percent.

Thursday’s decline in US stocks followed gains in the previous session after the Federal Reserve announced a more aggressive plan to wind down its asset purchases and hike rates in 2022.

However, in Europe, stocks gained despite the Bank of England on Thursday hiking interest rates for the first time since the onset of the pandemic and the European Central Bank announcing a cut in its bond purchases.

Stocks fall, Fed action in focus

Stocks fell on Tuesday, with the S&P 500 falling 0.7 percent.

“The large cap names are now starting to fall by the wayside, which is exactly what happened in 2018, the last time we had sort of that rolling correction idea,” said Morgan Stanley chief investment officer Mike Wilson.

The Federal Reserve kicked off its two-day meeting on Tuesday. With US producer prices rising 9.6 percent in November from the previous year, the largest yearly increase on record, investors are concerned that the Fed could remove monetary stimulus at an accelerated pace.

“If Fed Chair Powell emphasizes that the FOMC remains flexible, the ‘Fed put’ should remain in place. However, if his tone is overly hawkish, it could turn into a disaster like December 2018,” said Wolfe Research strategist Chris Senyek.

Meanwhile, news on the Omicron variant of the COVID-19 virus remained worrisome.

“Omicron is spreading at a rate we have not seen with any previous variant,” said WHO Director-General Tedros Adhanom Ghebreyesus on Tuesday. “Even if omicron does cause less severe disease, the sheer number of cases could once again overwhelm unprepared health systems.”

Stocks down on imminent Fed tightening, “tidal wave” of Omicron infections

The S&P 500 fell 0.9 percent on Monday.

“With the first Fed tightening imminently pending, investors are dumping anything but risk-off assets,” said Jim Paulsen, chief investment strategist for Leuthold Group.

Also worrying investors is the Omicron variant of the COVID-19 virus.

“Given the current available data, it is likely that Omicron will outpace the Delta variant where community transmission occurs,” the World Health Organization said last week.

UK Health Secretary Sajid Javic said on Monday that “we're facing a tidal wave of infection”.

And vaccines may not work as well against the new variant.

“Our findings show that vaccine effectiveness against symptomatic disease with the Omicron variant is significantly lower than with the Delta variant,” researchers at Oxford University wrote in a study released on Monday.

S&P 500 falls amid Omicron and inflation concerns

The S&P 500 fell 0.7 percent on Thursday after three consecutive days of gains.

Dr Scott Gottlieb told CNBC on Tuesday that the Omicron variant may extend the pandemic phase of COVID-19.

Gottlieb said that the US is still likely to “go from a pandemic into a more endemic phase” but later.

Greg Bassuk, chief executive officer of AXS Investments, said that “Covid is still the investor narrative” but “a lot of eyes are shifting to economic data to gauge where the Fed might be going in terms of potentially faster and greater extent of tapering”.

“While growth and labor markets have provided reasons to be optimistic about the economy, inflation is also running hot and sits at a 30-year high,” UBS wrote in a recent note to clients.

Trade credit insurer Euler Hermes said in a report published Thursday that global supply chain disruptions may continue until the second half of next year.

Anthony Scaramucci, founder and managing partner of SkyBridge Capital, said that inflation is “a transitory aftermath of the crisis” and will abate once supply chain constraints ease.

Omicron to “overwhelm” world in 3-6 months

Omicron is set to take over Delta as the dominant COVID-19 virus strain in the coming months.

Dr Leong Hoe Nam of Mount Elizabeth Novena Hospital in Singapore told CNBC that “Omicron will dominate and overwhelm the whole world in three to six months”.

Leong said that with a surge in cases, health-care systems could be overwhelmed even if only 1 or 2 percent of the cases end up in hospital.

On hopes for a vaccine targetted at the variant, Leong said “it is not practical”.

“We won’t be able to rush out the vaccines in time and by the time the vaccines come, practically everyone will be infected [with] Omicron given this high infectious and transmissibility,” he said.

However, Dr Syra Madad, a fellow at the Belfer Center for Science and International Affairs, said that “our current vaccines will hold up to a certain extent, with this new variant” and, with boosters, should still provide a “good level of protection”.