Stock futures extend gains as virus fears ease

Stock futures opened higher on Monday to hold onto gains after a recovery rally, with investors at least temporarily shaking off concerns over a new coronavirus variant and looking ahead to new market catalysts. 

Contracts on the S&P 500, Dow and Nasdaq rose. Each of the three major indexes had ended the regular trading day solidly in the green, with technology stocks leading the way higher and helping pull the Nasdaq up by nearly 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. 

Investors were heartened by remarks from the White House, when President Joe Biden said the newly discovered Omicron coronavirus variant was “not a cause for panic.” Biden said he intended to announce on Thursday the White House’s strategy for addressing coronavirus this winter, and that this plan would not include lockdowns, but would instead emphasize vaccinations, boosters and testing. The Centers for Disease Control and Prevention (CDC) on Monday updated its guidance to say all individuals aged 18 and older “should” get a booster coronavirus vaccine, strengthening this from previous language primarily aimed at getting those considered most at risk an additional dose of the shots. 

Prospects that widespread lockdowns would likely not come to the U.S. in the face of the latest variant helped fuel a broad risk-on rally on Monday. This came in sharp contrast with Friday’s moves immediately following the World Health Organization’s announcement of Omicron as a “variant of concern,” which sparked the Dow’s worst plunge since Oct. 2020. 

“This is not a repeat of March 2020,” Paul Schatz, Heritage Capital President, told Yahoo Finance Live on Monday. “This looks nothing like March of 2020, yet it’s so recent in our history, people immediately think, ‘Omicron is here, oh my gosh this is going to be a 30{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} decline, we’re going to go straight down’ … You need to equally weigh history, not weigh it based on how recent it was in your memory.”

Still, the sectors and individual stocks that outperformed on Monday were largely technology names, which have served as defensive trades throughout the pandemic as investors bet on more stay-in-place behavior among consumers. 

But at the same time, the emergence of the latest variant has also led a number of pundits to speculate that the Federal Reserve might take a more dovish approach to monetary policy to continue supporting the economy as it deals with ongoing virus-related concerns. That could in turn keep interest rates low for longer and support longer-duration growth stocks. 

“To take a step back, I think you had a global economy that in the fourth quarter [of 2020] through last week was looking incredibly strong … and then a new variant comes along,” Andrew Sheets, Morgan Stanley chief cross-assets strategist, told Yahoo Finance Live. “That would seem to work against a lot of the trades that work in that high-growth environment, and also seemed to disrupt this ‘do central banks need to act more aggressively’ narrative, because if there’s a new variant, then maybe we should be more cautious.”

Major vaccine-makers including Pfizer, BioNTech and Moderna have already said they were collecting data on the Omicron variant and determining whether and how they would need to rework their existing vaccines to address it. Researchers have also not yet determined whether the new variant is definitively more easily transmitted, or responsible for more severe illness, than previous versions of the virus. 

“Information is coming rapidly, it’s evolving in real-time. You can understand why investors [last week] were taking a little bit of a pause, particularly given the liquidity situation we had going into the U.S. holiday season,” Vivek Paul, BlackRock investment institution U.K. chief investment strategist, told Yahoo Finance Live on Monday. “I think the reaction you see today puts it in a little bit of context. We’ve seen more information come out, clearly we have to await the science and a bit more detail with regards to the longevity of how Omicron plays out.”

“But we would be in-line with the market reaction today: We think on balance, it would make sense to be invested in the markets at this moment in time,” he added. “It’s all about understanding whether or not this is a delay, or a derailment, of the restart that we’ve seen. And it seems most likely at this moment — not withstanding more information to come— that it looks like a delay.” 

6:15 p.m. ET Monday: Stock futures hold onto gains

Here were the main moves in markets as the overnight session kicked off: 

  • S&P 500 futures (ES=F): +9 points (+0.19{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,660.00

  • Dow futures (YM=F): +78 points (+0.22{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,155.00

  • Nasdaq futures (NQ=F): +29 points (+0.18{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 16,419.75

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2021.  REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2021. REUTERS/Brendan McDermid

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

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