Omicron Worries Weigh Down Markets

Wall Street joined a worldwide slump for financial markets on Monday amid worries about how badly the omicron variant, inflation, and other forces will hit the economy. The S&P 500 fell 1.1%, following up on similar drops across Europe and Asia, the AP reports. Stocks of oil producers fell sharply after the price of US crude fell 3.7%. Markets are also absorbing the potential death blow to a proposed $2 billion spending plan by the US government, as well as the Federal Reserve’s momentous move last week to accelerate its exit from the tremendous support it is providing the economy. The S&P 500 fell 52.62 points to 4,568.02. The Dow Jones Industrial Average fell 433.28 points, or 1.2%, to 34,932.16. The Nasdaq fell 188.74 points, or 1.2%, to 14,980.94.

Occidental Petroleum slid 3.8%, leading a long list of losing oil stocks. Producers of raw materials and financial companies were also down sharply amid the omicron worries. Germany's DAX lost 1.9% and Japan's Nikkei 225 dropped 2.1%. Roughly four stocks fell for every one that rose on the New York Stock Exchange. With COVID-19 cases surging again, leaders of governments around the world are weighing the return of restrictions on businesses and social interactions when many people seem to be sick of them. "Omicron threatens to be the Grinch to rob Christmas," Mizuho Bank’s Vishnu Varathan said in a report. The market "prefers safety to nasty surprises."

Omicron’s ultimate impact on the economy is unclear. Besides weakening it by putting restrictions on businesses, another feared outcome is that it could push inflation even higher. If it leads to closures at ports, factories, and other key points of the long global supply chains leading to customers, already ensnarled operations could worsen. But some economists argue that omicron could have the opposite effect: If the variant leads to lockdowns or scares consumers into staying home, economic activity could slow, and with it, the surging demand that has overwhelmed supply chains and driven up consumer prices. The worst-case scenario would see the economy decelerate without providing relief from already built-in inflation. (More stock market stories.)