Stocks rose on Monday, with investors further weighing the potential impacts of the Omicron variant after last week's volatile trading. Bitcoin prices edged marginally lower after a weekend sell-off.
The S&P 500 and Dow each gained, while the Nasdaq was slightly lower. Small-cap stocks outperformed, and the Russell 2000 added about 1%.
Some encouraging developments about the latest coronavirus variant helped boost risk assets. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), said during CNN's "State of the Union" on Sunday that reports from South Africa have so far suggested the Omicron variant may not cause infections more severe than those caused by earlier variants.
"Thus far, though it's too early to really make any definitive statements about it, thus far it does not look like there's a great degree of severity to it, but we've really got to be careful before we make any determinations that it is less severe or really doesn't really cause any severe illness comparable to Delta," Fauci said. "But thus far the signals are have been encouraging regarding the severity."
Meanwhile, however, Moderna (MRNA) President Stephen Hoge told ABC on Sunday that there was a "real risk that we're going to see a decrease in the effectiveness of the vaccines" currently available as the Omicron variant spreads. The vaccine-maker had also said last week it could have a COVID-19 booster shot designed to address the Omicron variant available as soon as March.
Bitcoin prices (BTC-USD) steadied and fell only marginally Monday morning after plunging over the weekend. The largest cryptocurrency by market capitalization sank by as much as 21% on Saturday, according to Bloomberg data, to fall to just above $42,000. Though no single obvious catalyst was behind the drop, some pundits attributed a combination of jitters about the Omicron variant, and anticipation for a faster asset-purchase taper by the Federal Reserve, to the volatility in the cryptocurrency. Prices hovered above $48,000 intraday on Monday.
The Fed's next monetary policy moves, in the face of the dual concerns of rising inflation and now the Omicron variant, have become a central focus for investors. Fed Chair Jerome Powell said last week that it could be appropriate to "wrap up [its] purchases a few months early," which has in turn led to speculation that at least one interest rate hike could come soon following the end of that program. Investors had initially been concerned about the specter of tighter monetary policy at a time when growth may already come under pressure due to the latest coronavirus threat. But with inflation rising at the fastest rate in at least three decades according to several major measures, the focus of the Fed right now has shifted to reigning in rising prices, according to a number of economists.
"For the Fed, the decision to taper more quickly is complicated — motivated more by inflation than by economic momentum and the labor market. A new wave of infections could certainly slow the recovery, but it could also impact prices," Rubeela Farooqi, chief economist for High Frequency Economics, wrote in a note. "If the variant results in renewed and widespread restrictions — as it already has in some countries, — then supply chain disruptions are likely to intensify, putting even more upward pressure on price metrics."
