Stock futures build on gains after rally

Stock futures opened higher on Monday after a rally earlier in the session, with volatility stemming from concerns about the Omicron variant at least momentarily abating. 

Contracts on the Dow extended gains. Earlier, the index ended higher by nearly 650 points, or 1.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, as cyclical names that had underperformed in the recent session rebounded strongly. The jump marked the Dow’s best day since March. 

More upbeat commentary suggesting the Omicron variant may not produce as severe of infections as previously feared helped boost markets. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), told CNN on Sunday that “thus far it does not look like there’s a great degree of severity” to the Omicron variant relative to prior mutations of the virus. 

The CBOE Volatility Index (^VIX) decreased to just over 28 on Monday as investors digested the remarks, bringing the so-called “fear gauge” down from its peak of more than 35 on Friday, or its highest level since January. 

“The level of volatility is somewhat logical here because a lot of this started prior to the Omicron variant really emerging. We knew that [Fed Chair Jerome] Powell was changing course in terms of his policy actions, he was speaking more hawkishly. Markets were already in the process of re-pricing a bit,” Jim Caron, Morgan Stanley Investment Management fixed income portfolio manager, told Yahoo Finance Live on Monday. 

“I know after Thanksgiving [news about Omicron] came out and that created a pretty big volatile event, but I think the initial conditions where valuations were pretty full, we knew the Fed was starting to change course and starting to tighten financial conditions a bit, and that’s going to mean that asset prices are going to have to reprice,” he added. “You start to get somewhat of a perfect storm when you add a health risk.”

Even amid the broad market rally on Monday, technology stocks were still the laggards, rising less than 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} compared to the S&P 500 and Dow’s at least 1.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} gains during the session. 

Alongside concerns of the Omicron variant, investors have also been ascertaining when and how robustly the Federal Reserve will move to accelerate its asset-purchase tapering program and raise interest rates from their current near-zero levels as inflationary pressures continue to mount. On Friday, the Labor Department is set to release its November Consumer Price Index (CPI), which is expected to show the fastest year-over-year rise in core consumer prices since 1991, at a 4.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} annual gain. 

“Tech and growth stocks are the longest-duration assets, which means they’re going to be the most negatively impacted in valuation by any bump up in inflation which would take interest rates up,” Paul Meeks, portfolio manager for Independent Wealth Solutions Management, told Yahoo Finance Live. “But on the other hand, what the Fed is doing and is even talking about doing, which is going from accommodative to more restrictive monetary policy, is a known.”

“It is well-broadcasted,” he added. “So despite that and even despite Omicron … which I actually think is starting to look more transitory and a lot less of a threat than we had with COVID back in the spring of 2020, I’m starting to feel again … more sanguine about the tech sector.” 

6:06 p.m. ET Monday: Stock futures open higher after rally 

Here were the main moves in markets in late trading on Monday: 

  • S&P 500 futures (ES=F): +4.75 points (+0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,594.75

  • Dow futures (YM=F): +41 points (+0.12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,253.00

  • Nasdaq futures (NQ=F): +9.5 points (+0.06{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 15,852.25

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 3, 2021.  REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 3, 2021. REUTERS/Brendan McDermid

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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