By Peter Nurse
Investing.com - U.S. stocks are seen opening slightly lower Tuesday, continuing the fragile start to the week as Omicron fears hit sentiment ahead of the start of the latest Federal Reserve meeting.
At 7 AM ET (1200 GMT), the Dow Futures contract was flat, while S&P 500 Futures traded 12 points, or 0.3%, lower and Nasdaq 100 Futures dropped 100 points, or 0.6%. The Dow Jones Industrial Average dropped 320 points, or 0.9%, on Monday, the S&P 500 fell 0.9% and the Nasdaq Composite closed 1.4% lower as investors rotated out of dumped technology stocks with high valuations.
The major averages posted strong gains last week, but some of the optimism generated by studies suggesting the new variant will not be as dangerous as previous versions dissipated Monday with the news from the U.K. of an Omicron-related death. In addition, China confirmed its first case of the new strain. Omicron's high transmissibility promises to be a stiff challenge to the country's zero-tolerance policy of Covid-19. While Europe and the U.S. appear unlikely to close their factories due to its spread, China's policy to date suggests it will be more open to the idea.
Elsewhere, a study out of the University of Oxford indicated that two doses of the currency Covid vaccines are substantially less effective at warding off the Omicron variant than previous versions, and a booster shot was needed to improve immunity.
That said, investors’ focus Tuesday will be on the start of the Fed’s two-day policy-setting meeting, with the central bank policymakers expected to discuss speeding up the phase-out of their bond-buying and possibly signal an earlier start to a new cycle of rate hikes.
Fed Chair Jerome Powell said as much last month in Congressional hearings, and since then data has emerged showing consumer prices rising 6.8% year on year in November, the largest jump in 30 years.
Market expectations now foresee an end to quantitative easing by March and a first 25 basis point rate hike by June.
Ahead of the meeting, November U.S. producer prices are due at 8:30 AM ET (1330 GMT), and are expected to have risen by 0.5% on the month, a surge of 9.2% on the year.
In the corporate sector, Apple (NASDAQ:AAPL) is likely to be in the spotlight after the iPhone maker’s stock climbed to a lifetime high of $182.09 on Monday, resulting in a market cap of $2.98 trillion. The company is already the most valuable in the world and could be the first company to hit the $3 trillion mark in market value.
Elsewhere, AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME), two of the most prominent 'meme stocks' of 2021, look set to extend Monday’s sharp losses as retail investors appear to desert them.
Oil prices drifted after the International Energy Agency cut its forecast for oil demand in the first quarter of next year by 600,000 barrels a day, saying crude markets have returned to surplus and face an even bigger oversupply issue early next year as the Omicron variant impedes international travel.
By 7 AM ET, U.S. crude futures edged higher to $71.31 a barrel, while the Brent contract gained slightly to $74.43.
Additionally, gold futures fell 0.2% to $1,785.35/oz, while EUR/USD traded 0.3% higher at 1.1319.