By Yasin Ebrahim
Investing.com – The S&P 500 moved off session lows Monday, but was still under pressure following a slump in financials amid fears that the omicron-fueled surge in Covid-19 cases would prompt further restrictions and derail the global economic recovery.
The S&P 500 fell 1.5%, the Dow Jones Industrial Average lost 1.4%, or 519 points, the NASDAQ slumped 1.4%.
“Omicron news is dominating the headlines in the final trading days ahead of the Christmas holiday,” Stifel said following reports that the new variant had been identified in 43 out of 50 U.S. states.
The US wave of omicron is projected to “be in the steep part of its exponential growth in 2 to 3 weeks, just as we turn the corner into the new year,”Morgan Stanley said.
Cyclicals stocks, those that move in tandem with the economy were the hardest, with banking stocks leading financials lower as U.S. Treasury yields.
Synchrony Financial (NYSE:SYF), Lincoln National (NYSE:LNC), Capital One Financial (NYSE:COF) were among the biggest decliners.
Falling Treasury yields hurts the net interest margin of banks – the difference between the interest income generated by banks and the amount of interest paid out to depositors.
In another blow to the outlook on the recovery, Senator Joe Manchin rejected the Biden administration’s $1.75 trillion spending program amid concerns about adding to the national debt.
Manchin later on Monday appeared to extend olive branch, however, hinting that he would be willing to back a less costly version of the ‘Build Back Better Plan.’
Goldman cut its forecast for GDP in the first, second, and third quarters of 2022, and said “the odds [to pass the spending bill] have clearly declined and we will remove the assumption from our forecast.”
Energy, meanwhile, struggled to cut losses as oil prices remained pressure, though bounced off their session lows.
Big tech also soured investor sentiment on stocks as Apple (NASDAQ:AAPL) , Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT) were in the red.
In other news, Carnival (NYSE:CCL) rose 1% shrugging off the Covid jitters after forecasting a profit in the second quarter of 2022, driven by strong advanced bookings for the second half of 2022 and 2023.