Wall Street stocks, oil drop sharply on concerns over new Covid-19 variant

Wall Street has slumped to its worst Black Friday losses on record, as new coronavirus fears shake global markets.

On Wall Street, Moderna shares rose 21 per cent in a day, while Pfizer jumped 6.1 per cent. Picture: Angela Weiss, AFP.

Global stocks, oil prices and government-bond yields slumped after South Africa raised the alarm over a fast-spreading strain of the coronavirus, triggering concern that travel restrictions and other curbs will spoil the global economy’s recovery.

The Dow Jones Industrial Average fell 905.04 points, or 2.5 per cent, to 34899.34. It was the Dow’s biggest one-day percentage drop since October 2020.

The S&P 500 lost 106.84 points, or 2.3 per cent, to 4594.62 and the Nasdaq Composite dropped 353.57 points, or 2.2 per cent, to 15491.66. It was the worst Black Friday session on record for all three indexes. Markets closed early because of the holiday.

US crude oil tumbled 13 per cent to $US68.15. Traders fretted that lockdowns could reduce demand for transportation fuels. Bitcoin, following the path of other risk assets, skidded 8 per cent to below $US55,000.

“It’s not a great day to wake up on Black Friday and see news about a concerning variant,” said Jessica Bemer, a portfolio manager at Easterly Investment Partners.

Investors reached for safe havens. The yield on the 10-year Treasury note tumbled to 1.482 per cent from 1.644 per cent before the Thanksgiving break, on track for its biggest drop since March 2020. Gold, another perceived store of value when riskier assets retreat, rose 0.1 per cent to $1,785.30 a troy ounce.

The pullback created whiplash for markets that had, to a great extent, parked worries about coronavirus.

Scientists say the new coronavirus variant, dubbed B.1.1.529, has a high number of mutations that may make it more transmissible and allow it to evade some of the immune responses triggered by previous infection or vaccination. Dozens of countries have already imposed travel restrictions to and from southern Africa.

Investors feared the strain could set back months of efforts to revive the world economy and save lives.

“For now, Covid-19 is back on the table,” said Takeo Kamai, head of execution services at CLSA in Tokyo.

Investors seemed to be following the playbook they pulled out early in the pandemic: sell travel stocks, buy work-from-home stocks. “This is a market that is well practised in terms of reacting to Covid,” Ms Bemer said.

Delta Air Lines, United Airlines and American Airlines Group all dropped 8 per cent or more, after the UK, Israel and Singapore restricted travel from southern Africa. The European Union said it would propose stopping air travel from the region. Cruise stocks including Royal Caribbean Group were hammered, while Exxon Mobil fell 3.5 per cent, or $US2.23, to $US61.25. Chevron fell 2.3 per cent, or $US2.68, to $US114.51.

Moderna rose 21 per cent, or $US56.24, to $US329.63. Pfizer gained 6.1 per cent, or $US3.11. to $US54. Netflix and DoorDash, which previously benefited from stay-at-home orders, rose 1.1 per cent and 1.6 per cent, respectively.

The World Health Organization on Friday night said the new strain was a “variant of concern.” Rising caseloads of other variants have already led some European countries to tighten rules for transportation, shopping and workplaces.

Many US investors had taken the day off, extending their Thanksgiving holiday. Ms Bemer said she’d planned on working Friday, though she was staying with relatives for the holiday. “It’s a busier day than we expected,” she said.

The combined trading volume on the New York Stock Exchange and Nasdaq was about 6.9 billion shares. The average Black Friday volume since 2007 has been 2.9 billion shares, according to FactSet.

Oil prices experienced some of the biggest declines. Traders said money managers were rushing to unwind wagers that a mismatch between tight supplies and rising demand would push crude prices toward $US100 a barrel. The swoon might encourage the Organisation of the Petroleum Exporting Countries and a group of Russia-led allies to pause steps to pump more oil when they meet next week.

“If the announcement is, the vaccine works on this, back up we go,” said Adam Webb, chief investment officer of Blue Creek Capital Management. “If the vaccines don’t work against it, then good night Vienna.”

Money managers said that even if the variant proves more resistant to vaccines than earlier strains, there were reasons to think the economic damage could be contained. MRNA vaccines, such as those manufactured by Pfizer and Moderna, can be quickly updated, and businesses have adapted to containment measures, ensuring that the blow from each lockdown has lessened.

However, elevated inflation could prevent central banks and governments from spraying economies with stimulus in the event of renewed widespread lockdowns.

“That’s the big cause for concern: Is policy able to respond and bail out markets and economies this time given inflation?” said Edward Smith, co-chief investment officer at the Rathbone Investment Management. Trouble in supply chains stemming from shutdowns could further boost inflation, he added.

International stock markets tumbled. Losses for travel, leisure, banking and energy stocks — all of which suffered during previous periods of economic turmoil in the pandemic — led the Stoxx Europe 600 to shed 3.7 per cent, the pan-continental gauge’s worst one-day percentage drop since June 2020.

In Asia, Hong Kong’s benchmark Hang Seng Index lost 2.7 per cent and Japan’s Nikkei 225 fell 2.5 per cent. China’s Shanghai Composite Index fell 0.6 per cent.

Technology stocks wilted after Bloomberg reported that China had asked Didi Global to devise a plan to delist in the US. The Wall Street Journal has previously reported the ride-hailing giant was considering going private, partly to placate Chinese authorities, and that regulators in China had suggested it list in Hong Kong.

Additional reporting: Paul Vigna, Suryatapa Bhattacharya contributed to this article.

The Wall Street Journal