Daily Markets: Equities Aim to Rebound From Omicron Sell-Off on Cyber Monday

Today’s Big Picture

Friday’s Omicron-inspired sell-off triggered a shoot first, ask questions later sentiment that seems to have persisted into today as Asian markets again saw red. Japan’s Nikkei led the way down 1.63% with Hong Kong and Korea trading off 0.95% and 0.92%, respectively. Taiwan’s TAIEX was lower by 0.24% and the Shanghai Composite, while not too damaged was off 0.04% on the day. Midday trading in Europe currently sees all markets trading higher except for Denmark’s OMX Copenhagen 20. Similarly, U.S. market futures are pointing to a healthy open in a clawback attempt from Friday’s sharp sell-off.

Equity markets sold off worldwide on Friday after South Africa raised alarms about Omicron, with selling likely driven more by the fear of new government lockdowns and social distancing than by the variant itself. As the weekend wore on, the UK, Australia, Italy, Hong Kong, Belgium, Germany, and Canada reported detecting the Omicron variant, while New York Governor Kathy Hochul (D) declared a state of emergency to prepare for the new variant.

On Sunday, Israel became the first country to ban the entry of all foreigners. Reportedly, the UK government will convene an urgent meeting of Group of Seven health ministers today to discuss latest developments. Also today, President Biden is expected to give an update. Equity markets will be watching any and all developments related to Omicron; the prevailing point of concern will likely be focused on potential curbs and other efforts to limit the spread of the virus and the economic impact from those actions.

Today will close out the Black Friday-Cyber Monday holiday shopping weekend, and so far, it’s not shaping up quite as expected. According to Adobe (ADBE), online spending for Black Friday came in at $8.9 billion, near the lower end of expectations and less than in 2020, while traffic in physical stores was 28% below pre-pandemic levels according to Sensormatic Solutions. Consumers are expected to spend up to $11.3 billion on Cyber Monday.

Data Download

Coronavirus

Unless you’ve been hiding out in a remote cabin with zero connectivity, you’ve probably heard that there is yet another new strain of the coronavirus, dubbed Omicron or B.1.1.529. It was first detected in southern Africa and preliminary evidence suggests it is more easily transmissible and may be more able to bypass existing immunity. It has also been detected in one person in Belgium and two people quarantined in Hong Kong. Dozens of countries, including the U.S., have restricted travel from South Africa and neighboring nations. By Sunday Canada, Australia, the Netherlands, and Austria joined the group of countries that have detected the variant. Israel banned all foreigners from entry, Japan has announced similar plans, and the UK is set to impose new restrictions on Tuesday.

International Economy

European Central Bank officials Fabio Panetta and Christine Lagarde today both reiterated that upward pricing pressures are temporary, and they do not believe that rate hikes are necessary to counteract them.

After all the volatility in oil last week, a good bit of focus was expected to be on this week’s OPEC technical meeting, but it has been postponed to assess the potential impact of Omicron. The revised schedule will allow the group to analyze the market after a more than 10% drop in prices Friday following the spread of the Omicron variant.

Japan saw retail sales in October rose 0.9% YoY after falling 0.5% in September, below the expected 1.1% YoY increase.

Spain’s inflation rate for November matched the +5.6% YoY forecast, accelerating from the 5.4% YoY increase in October, hitting the fastest rate in nearly three decades. The core inflation reading jumped to 1.7%, the fastest since July 2013.

In the Eurozone, Consumer Confidence in November fell to -6.8 from October’s -4.8, matching the consensus forecast. The region’s Economic Sentiment dipped to 117.5 in November from 118.6 in October, also matching the expected figure for the month.

Domestic Economy

Last Wednesday the weekly initial jobless claims came in at 199,000, the lowest level of initial claims since November 15, 1969, and well below expectations for 260,000. That said, unadjusted claims (excluding the seasonal adjustment) were a 7.6% increase from the previous week. Second-quarter GDP was revised slightly higher to 2.1%, below expectations for 2.2%. Durable goods orders for October fell 0.5% MoM after falling -0.4% MoM in September, versus expectations for a 0.2% increase.

Later today we will get Pending Homes Sales and the Dallas Fed Manufacturing Index.

Markets

Black Friday was red across the board. The Russell 2000 fell 3.7%, the Dow dropped 2.5% for its worst day since late October of 2020, the S&P lost 2.3%, and the Nasdaq ended down 2.2%. The CBOE S&P 500 Volatility Index (VIX) rose 54%, its largest increase since January, to close at over 28 after having dropped as low as 14 over the summer. Bond yields also fell across the board with the 2-year losing 13.6 basis points to 0.508%, the 10-year Treasury dropped 16 basis points, to 1.485%, the 30-year fell over 14 basis points to 1.826%. U.S. oil had its worst day of 2021 on Friday as well, closing down 13.6% to $68.15 per barrel. Brent closed down 10.7% at $73.45. Bitcoin on Friday traded down over 20% from its all-time high of nearly $69,000 it hit earlier this month.

Reopening stocks such as United Airlines (UAL), American Airlines (AAL), and International Consolidated Airlines Group (BABWF) plummeted on the news of the new variant, falling 9.6%, 9.0%, and 14.0% respectively. Cruise companies such as Carnival Corp (CCL) and Norwegian Cruise Line Holdings (NCLH) lost 10.5% and 11.1% respectively. On the other end of the spectrum, Zoom Video Communications (ZM) rose 12.2% on Friday, Moderna (MRNA) rose 20.9%, and Pfizer (PFE) gained 6.3%.

Stocks to Watch

Procter & Gamble (PG) is recalling 8 of its Old Spice sprays and 10 of its Secret antiperspirant sprays after it detected benzene, a cancer-causing chemical, in some of the products.

Peloton (PTON) has sued Lululemon (LULU) after Lululemon’s lawyers had earlier this month warned Peloton that the company would sue Peloton unless it stopped selling its new clothes, arguing that some of Peloton’s bra and leggings infringed on Lululemon’s patent designs.

Shopify (SHOP) announced a record-setting Black Friday with sales of nearly $2.9 billion from the start of Black Friday in New Zealand through the end of Black Friday in California.

Nokia (NOK) has been selected by Ooredoo Group to bring multiple technologies and services, including 5G, to customers in the Middle East, North Africa, and Southeast Asia as part of a multi-country, five-year deal.

Automobilwoche reported Tesla (TSLA) will launch its German production in December with as many as 30,000 vehicles manufactured there in the first half of 2022.

Nissan (NSANY) unveiled unveils plans to spend ~$17.6 billion over the next five years to electrify more of its lineup and introduce 15 new electric vehicle models by 2030.

Earnings Announcements & Guidance

Before U.S. equity markets begin trading today, quarterly results from Frontline (FRO), Korn Ferry (KFY), and Li Auto (LI) will be published.

IPOs

The IPO calendar is clear through the end of November and light through the end of the year for more, visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Only Golub Capital (GBDC) is expected to report its quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

• November 30: S&P/Case-Shiller Home Price Index, Chicago PMI, CB Consumer Conference
• December 1: ADP Employment Change, Markit and ISM Manufacturing, Construction Spending, Total Vehicle Sales
• December 2: Jobless claims
• December 3: Non-Farm Payrolls, Markit and ISM Non-Manufacturing PMIs, Factory Orders
• December 7: Balance of Trade, Non-Farm Productivity, IBD/TIPP Economic Optimism

Thought for the Day

“In a world deluged by irrelevant information, clarity is power.” ~Yuval Noah Harari

Disclosures

• lululemon athletica (LULU), Peloton (PTON), Tesla (TSLA) are constituents of the Tematica BITA Cleaner Living Index
• lululemon athletica (LULU), Peloton (PTON), Tesla (TLSA) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• Nokia (NOK), Shopify (SHOP) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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