From the Wall Street Journal’s “Stock Futures, Oil Drop on Concerns Over New Covid-19 Variant” posted early Friday:
Global equity markets and U.S. stock futures fell after South Africa raised the alarm over a new, fast-spreading strain of the coronavirus, triggering concern about the potential for new travel restrictions or other curbs that could limit economic activity.
With U.S. stocks set for a shortened trading session after a one-day Thanksgiving break, market participants said the global moves were likely amplified by thin trading volumes…
South Africa’s government said Thursday it was considering new public-health restrictions to contain the new variant, dubbed B. 1.1.529. Scientists say it has a high number of mutations that may make it more transmissible and allow it to evade some of the immune responses triggered by previous infection or vaccination. The variant has been detected in a South African traveler in Hong Kong. The South African rand weakened sharply against the dollar, with $1 buying about 16.3 rand.
In Asia-Pacific, Hong Kong’s benchmark Hang Seng Index stood 2.7% lower, while Tokyo’s Nikkei 225 closed down 2.5%. Australia’s S&P/ASX 200 pulled back 1.8%.
“Everybody seems to be panicking about this new variant that is cropping up out of South Africa,” said Rob Carnell, the head of research and chief economist for the Asia-Pacific region at ING.
Charts: Yahoo!Finance sees a bearish fast stochastic pattern. Max pain is at $157.50 with a call peak at $165. Updated 7:30 a.m. Eastern:
1) Covid variant concerns, travel restrictions for S. Africa and possibly Europe, and lockdowns on the table for some countries —> could lead to less oil demand, dropping oil prices. Good for US consumers (eventually), bad for oil companies (eventually), maybe tamps inflation a smidge.
2) the Fed signals what everyone knows, inflation is here, anticipated (because that’s what happens in a rebound recovery), and the Fed will raise rates sooner than later (and it’s inevitable and a completely predictable action), but Wall Street psychologically wants to party until it has to be told No, we’re really going to raise rates. Then Wall Street predicts doom and gloom, algorithms go haywire, and we’ll see a pullback on “the news”.
3) Holiday spending will be strong yet supply chain issues will cause several conflicts – revenue will be up for many, some expectations reduced by supply impacting sales, prices will rollercoaster depending on sales promotion aggressiveness vs reduced supply keeping prices high on the most desirable products (Apple for both?). Of course, Wall Street will be self-depressed about the post holiday lull vs year end and January sales to clear inventory and then worry further about how retailers will restock into Q1 2022 given the production and shipping issues still existent?
4) Finally, how long will employment and labor numbers take to meet and balance job demand? Had a large portion of labor fundamentally left some service sectors and where are they going? Labor shortages have forced wages higher for the first time in a long time, its inflationary but good for workers which is eventually good for the economy because they will save AND spend, so round and round we go.
That’s why, IMO, for analysis, you can be optimistic, pessimistic, balanced, realistic, or pragmatic. And then understand that people are gonna do what they’re gonna do, regardless of what is going on from a macro level.
If you happen to be referring to “the middle class” (remember them?), their wages have, at best, kept up with inflation for the past 30-40 years.
It took a pandemic to finally rattle the wage cage.
Oh, the irony.
DOW off 800 pts before the market open. Guess investors will eventually pivot to Stay at Home stocks again. Not today but over time. Netflix, Zoom, Amazon & Apple are among that set. Oil prices will drop further but fearful folks won’t be going about using their cars. The kids will fill the nightclubs not matter what.
I’d have a more positive outlook if state governors in certain heavily populated states weren’t so opposed to masks & vaccines.
A more depressing fact is that while Germany and the U.S. have comparable vaccination rates in total (full and partial), 68% of Germans are fully vaccinated while only 58% of Americans are. https://ourworldindata.org/covid-vaccinations
The anti-vaxxers are both ignorant and selfish – there’s no other way to characterize them.
Very good recap and I especially appreciate the waves crashing at medical’s (Emergency Rooms) doors. US medical systems will be stressed yet again and in those locales where vaccination rates are lower & lowest, we WILL see highest case and mortality rates plus very clear evidence (again) of unvaccinated populations of more younger people vs old becoming statistics through their decisions or non-decisions.
Covid virus doesn’t care what you decide medically or politically. It only cares about whether you’re susceptible to infection or not. If you’re vaccinated, you have a jump started antibody response ready – you can still be infected but the infection is much lower replication wise, widely lower number of viral particles produced before antibody response kicks in, and total viral load significantly lower (for infectious shedding) as your body clears the infection. That is why vaccinated patients predominantly have less intense and fewer symptoms, less likelihood of spreading (not zero), and, always with exceptions, less hospitalizations and mortality.
Contrast that with completely unvaccinated people with no prior Covid exposure – once infected (and more likely to since that regional cohort may eschew masking, social distancing, and for some, actively seek out venues and activities where crowding with like minded occurs – Sturgis, rallys, etc. come to mind) ), the virus has unfettered cell access and ability to replicate, turning especially respiratory cells into virus factories. Replication escalates exponentially without early and sufficient antibody response and within 5-10 days, either you do mount a decent response and hold Covid off, or you’re getting worse by the hour, lungs and oxygen transfer deteriorating, those folks now have, IMO a 75-100% chance of being hospitalized. Once in, 100% chance for at least a 5-10 day stay minimum, plus better than even chance of ICU stay where IMO you have a <50% chance of making it out alive.
-Ron White
So much for a tenth green day in a row. Darn.
“The worse response we need now is another government over reaction…”
Nope. The worst response is another government UNDER-response, like the government that dropped the ball in the first place on “new mandates and quarantines” and doomed us to our present circumstances. We need to do the tough thing and quite taking the easy way out. And we need to start prosecuting those who are purposefully endangering the rest of us under the guise of individual rights. Including the utterly irresponsible leaders pandering to that crowd in order to stay in power or gain more power.
Still, I would have liked to have seen that 10th green day in a row….
But the deck was stacked against AAPL, what with Max Pain operating as a downward force and buyers away on a four day weekend. Capping that was the negative Covid news depressing the overall market.
Second it’s a shortened, holiday session. Traders took off Wednesday late afternoon for a long weekend in the Hampton. This is reflected in trading volume, even at bargain basement pricing there were no buyers or sellers
Lastly, by the time traders return to their respective desks on Monday we’ll have a much clearer understanding of the new variant and its potential to disrupt. My guess is that the markets will respond positively at that time, as the bargain hunters load up.
“I’d have a more positive outlook if state governors in certain heavily populated states weren’t so opposed to masks & vaccines.”
In our most populous state, California, masks and vaccines are still promoted and used, especially in coastal urban cities with a few exceptions. California’s vaccination rate is 63% fully and 78% at least 1 vax respectively for 39.3M people. Texas and Florida as next most populous states are at 55%/64% (28M pop.) and 61%/71% (21M pop) respectively. The US vaccination average is currently 59.5%/69.9%. This covers 88.3M people. If we add New York at 68.2%/77.5% (19.5M), that covers 107.8M people, fully 32.3% of the US population. I haven’t yet studied the booster uptake rates by states.
Further below in the data cited is a breakdown of age group vaccinations by age per state and the younger groups’ uptake is interesting to review. It is good to note that the most vulnerable aged group of 65+ that is fully vaccinated is better than 90% in 32 states, 85-89.9% in 15 states, 80-84-5% in 2 states, and one state below 80%.
Time and experience will tell whether going forward through year end and into early 2022 if population adjusted case and fatality rates differ significantly by region or state.
Data source: Mayo Clinic vaccine tracker:
https://www.mayoclinic.org/coronavirus-covid-19/vaccine-tracker
“WHO has given the new variant its own Greek name. Previously known as B.1.1.529, it has now been dubbed “Omicron.”
“ Yesterday, Omicron had been detected in South Africa, Hong Kong and Botswana. Today, Israel announced one confirmed case and two more possible cases. The confirmed case was discovered in a person arriving from Malawi. Belgium also announced it had identified the first case in Europe. Reuters reported that the case was a young woman who “developed symptoms 11 days after returning from a trip to Egypt via Turkey.”
The first known incident of Omicron was collected in South Africa on November 9 and formally identified Tuesday.”
From Africa CDC:
“ By 25th November 2021, the B.1.1.529 variant had been detected in 77 samples collected between 12-20 November from Gauteng province in South Africa, 4 samples from Botswana and 1 sample in Hong Kong.”
And a UK science site:
“Looking at variants over time in South Africa, the Beta variant was associated with their second wave of infection, which was replaced by the Delta variant which drove the third wave in South Africa. Initial observations suggest that B.1.1.529 was able to become established in Gauteng province and outcompete Delta. There are several explanations for this. A large super-spreader event linked to B.1.1.529 would give the impression of outcompeting Delta (which is otherwise the ‘fittest’ variant we have seen to date). But the other explanation is that B.1.1.529 can actually outcompete Delta. Further studies are required to confirm this.
“Lineage B.1.1.529 has also very recently been detected in Botswana (n=4) and Hong Kong (n=1, in a traveller from South Africa). No cases have been confirmed in the UK. It is important not to assume that the variant first emerged in South Africa.
“In summary, the full significance of this variant is not known.“
https://www.sciencemediacentre.org/expert-reaction-to-b-1-1-529-variant-situation-in-south-africa-and-news-that-travellers-arriving-in-the-uk-from-several-southern-african-countries-will-have-to-quarantine-and-from-1200-uk-time-on-t/