Wall Street's main indexes were set to fall sharply on Tuesday after a warning from vaccine maker Moderna's chief executive on the effectiveness of COVID-19 shots against the Omicron variant hammered travel, energy and banking shares.
Global equity markets tumbled after Moderna CEO Stéphane Bancel also told the Financial Times that it was likely the current crop of vaccines would need to be modified.
Adding to the fears, Regeneron Pharmaceuticals Inc said its COVID-19 antibody treatment and other similar drugs could be less effective against the Omicron variant.
"This new variant has caused the market's worst enemy to accelerate, and that is uncertainty," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
"I don't expect the market to collapse here, but I do expect a lot of days like we're seeing now, you go down a 1-1/2%, then rally a bit and go back down again ... one step forward and two steps back."
Occidental Petroleum led losses among energy shares, with the company's stock down 3.5% in premarket trading, as oil prices slumped nearly 3% on demand concerns.
Major Wall Street lenders sank, tracking a dip in Treasury yields as safe haven demand kept bond buying high. Bank of America was the biggest loser among peers, down 2%.
American Airlines Group fell the most among airline stocks, which were down between 1.5% and 1.9%. Cruise operators Carnival Corp, Royal Caribbean and Norwegian Cruise Line dropped about 2% each.
Futures tracking the small-cap Russell 2000 index also slid 1.4%.
Main Indices Rebounded Monday
Wall Street's main indexes rebounded on Monday from Friday's deep sell-off, as investors were hopeful that the Omicron variant would not lead to lockdowns after reassurances from U.S. President Joe Biden.
Uncertainty about the new variant has triggered fresh alarm at a time when supply chain logjams are weighing on economic recovery and central banks globally are contemplating a return to pre-pandemic monetary policy to tackle a surge in inflation.
At 8:14 a.m. ET, Dow e-minis were down 400 points, or 1.14%, S&P 500 e-minis were down 45 points, or 0.97%, and Nasdaq 100 e-minis were down 93 points, or 0.57%.
The benchmark S&P 500 and the tech-heavy Nasdaq are down about 1.9% and 2.7%, respectively, from their record highs hit earlier this month, while the blue-chip Dow has slipped 3.9%.
Powell & Yellen to Speak at 10 a.m.
Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell are due to testify before the U.S. Senate Banking Committee at 10 a.m. ET (1500 GMT) to discuss the economic recovery from the pandemic.
As part of his prepared remarks, Powell said he continues to expect inflation to recede over the next year, but warned that the new variant of COVID-19 muddies the outlook, and prices could continue to rise for longer than earlier thought.
Focus will also be on November readings of Chicago PMI and consumer confidence data due later in the day.
Bucking the trend, stay-at-home stocks, which benefited the most during the lockdown, such as Netflix Inc, Teladoc Health, Peloton Interactive and Zoom Video Communications rose between 0.7% and 1.7%.
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