By Geoffrey Smith
Investing.com -- U.S. stock markets started the weak in bearish fashion, with all three major indices falling over 1% in response to fears of another Covid-19 driven slowdown - this time accompanied by the prospect of rising interest rates.
By 9:45 AM ET (1445 GMT), the Dow Jones Industrial Average was down 601 points, or 1.7% at 34,764 points, while the S&P 500 and Nasdaq Composite were both down 1.4%. The Dow, with its heavy weighting of cyclical stocks, underperformed as warnings of the spread of the new Omicron variant of Covid-19 stoked fears that people will shun mixing over the next few weeks, even if they are allowed to.
The mood was also soured by news over the weekend that Sen. Joe Manchin (D., WVa.) had effectively blocked the passage of the 'Build Back Better' bill through the Senate, saying he couldn't support it in its current form. With the Senate split 50-50, the only chance of passing it "as is" depends on the administration convincing Republican Senators to vote for it - something that appears unlikely in the current environment.
Goldman Sachs analysts downgraded their growth forecasts in response to the news, factoring in a lower fiscal stimulus and also the negative effect on labor supply. The bill had aspired to make it easier for low- and middle-income families to get child care, making it easier for both parents in a household to take jobs. Labor constraints have increasingly been cited as a risk factor in U.S. companies' earnings updates over the last couple of weeks, with high-profile strikes at the likes of Kellogg (NYSE:K) and Deere (NYSE:DE).
The morning belonged to pharma companies, with Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) all bucking the trend, while reopening plays suffered particularly. Pfizer stock rose 1.1% to a new all-time high, while Moderna stock rose 1.7% after saying trial data showed that a booster shot of its Covid-19 vaccine largely restored its effectiveness against the new Omicron strain of the virus, which forced a string of restrictive measures in Europe over the weekend, including a full lockdown in the Netherlands.
Novavax stock meanwhile, soared at the opening after the EU's medicines regulator cleared its Covid-19 vaccine for use by adults in the EU. However, the stock quickly ran into profit-taking to trade down 2.6% by 10 AM ET. It has risen some 50% so in the last two weeks. The company aims to produce a new version tailored specifically to Omicron in the next couple of months.
The one reopening play outperforming was AMC Entertainment (NYSE:AMC) stock: it rose 0.7% after a record-busting opening by the "Spider-Man: No Way Home" movie provided a reminder of the pent-up demand for shared big-screen experiences.
Elsewhere, Oracle (NYSE:ORCL) stock fell 2.9% after the software giant confirmed the acquisition of Cerner (NASDAQ:CERN) for a slightly higher price than had previously been mooted.