US stock index futures rose on Monday after a big sell-off on Friday. Many investors are following the latest developments related to the new strain of coronavirus – omicron, and, according to the latest data, it is not as dangerous as it was announced last week.
Dow Jones Industrial Average futures added 208 points or 0.6%. S&P 500 futures gained 0.82% and Nasdaq 100 futures rose 1.07%. Last Friday, the Dow Jones index showed its worst day since October 2020, falling by 905 points, or 2.5%. The S&P 500 fell by 2.3%, and the Nasdaq Composite immediately fell by 2.2%. At the end of the trading week, the indices closed in the red zone.
At the moment, everyone is scared of a new strain of coronavirus, and it remains the biggest risk for the markets in the near future. This will preserve the volatility that speculative traders love so much. On the other hand, the new strain of coronavirus will distract investors a little from the situation in which the Federal Reserve System is now with its program to support the economy and buy bonds. It will also distract from the constant monitoring of treasury bond yields, the growth of which is dragging down the entire NASDAQ technology sector.
As for the coronavirus, at the moment, it is difficult to say what the consequences of the new strain will be. Last week, scientists said they would need several weeks to study it thoroughly. On Friday, the World Health Organization called the omicron strain a "dangerous option." And while scientists continue to explore this option, a large number of omicron mutations are alarming. According to preliminary WHO data, this strain has an increased risk of re-infection.
Let me remind you that for the first time this strain was reported to the WHO from South Africa. It was then discovered in the UK, Israel, Belgium, the Netherlands, Germany, and Italy. In the USA, the new strain has not yet been registered. Many countries, including the United States, have restricted entry from southern Africa.
As noted above, pharmaceutical companies and vaccine manufacturers have already announced that they have begun to investigate omicron, tests are already underway. It is not yet known how the new strain will react to existing vaccines and whether new formulations will be required. This was stated by the director of Moderna Paul Burton in his interview on Sunday. "The vaccine manufacturer may release a new formula against the omicron variant early next year," Burton said.
This week, investors will focus on several economic data on the labor market. This Friday, the November employment report is expected, which will show whether steady job growth has been maintained. Economists expect 581,000 jobs to be created in November. An overview of the manufacturing sector from the ISM Institute of Supply Management will be published on Wednesday. Economists also expect good results.
As for the technical S&P 500
The apparent collapse of the index last week is not yet systemic, and, most likely, traders will take advantage of the moment and start buying it off. All this is provided that the situation around the new strain of coronavirus will gradually reduce the pressure on investors. The primary goal of buyers of the index is its return to the resistance of $ 4,660. Only a real consolidation at this level will lead to an increase in the area of $ 4,718 and will keep the chance of updating historical highs. The fact that we will have a meeting of the Federal Reserve System in December will keep bullish demand. If buyers fail to cope with the task and do not break above $ 4,600, most likely, we will see a repeated decline to $ 4,584, and then a breakthrough of this level – this will push the trading instrument to $ 4,551 and $ 4,512.