Stocks reversed course Thursday, clawing back some of their losses from the previous day in volatile trading as investors continue to assess the new omicron variant’s potential impact on the U.S. economic recovery.
The Dow Jones Industrial Average rose 1.8%, over 600 points, to 34,640 while the S&P 500 gained 1.4% to 4,577 and the Nasdaq Composite 0.8% to 15,381.
The major indexes plunged Wednesday after the CDC confirmed the first case of the new Covid omicron variant had arrived in the United States.
Thursday’s rally came as stocks shrugged off reports of a second confirmed U.S. omicron case, discovered in Minnesota, with investors buying the dip.
Market volatility has surged since last Friday as investors assess the new variant: Wall Street’s preferred fear gauge, the CBOE Volatility Index, recently spiked above 30—levels not seen since markets slumped in January amid a winter surge in Covid-19 cases.
Travel stocks were among the biggest gainers, with shares of airlines, hotels and cruise companies rebounding from Wednesday’s sell-off: Delta Air Lines, Hilton Worldwide and Norwegian Cruise Line all jumped more than 6%.
The broader market also got a boost from solid economic data, with the number of Americans receiving state unemployment benefits falling to its lowest level since March 2020, the Labor Department said Thursday.
“We’ve seen this movie before and Wall Street will likely remain COVID-variant headline driven until a clear assessment over this wave can be made,” according to Ed Moya, senior market analyst at Oanda. Expect the market to react sharply to any negative updates regarding omicron, inflation readings or supply chain issues, he predicts.
The Dow plunged 900 points last Friday when the WHO labeled omicron as a “variant of concern,” then rebounded slightly Monday after President Biden said there would be no need for new lockdowns. The Dow then tumbled 650 points Tuesday and on Wednesday gave up early gains to finish 450 points lower.
What To Watch For:
Markets are likely to remain choppy amid new headlines about the variant, with the Federal Reserve warning earlier this week that omicron could hinder the economic recovery, not to mention complicate the inflation outlook. Fed Chairman Jerome Powell told Congress that higher prices will now linger “well into next year,” notably dropping the use of the word “transitory” when describing inflation.