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Beyond the Numbers

Bargain Hunting May Contribute To Rebound On Wall Street
11/29/2021 8:59 AM

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to regain ground following the sell-off seen in the previous session.

Bargain hunting may contribute to initial strength on Wall Street after the steep drop seen last Friday dragged the major averages down to their lowest closing levels in at least a month.

Travel-related stocks may help lead an early rebound despite lingering concerns about new travel restrictions following the detection of a new coronavirus variant.

The new Covid variant, assigned the Greek letter omicron, has been labeled a “variant of concern” by the World Health Organization.

The WHO described the global risk posed by the omicron variant as “very high” due to a high number of mutations that “may be associated with immune escape potential and higher transmissibility.”

However, the South African doctor who treated early cases of the new variant told the BBC countries could be “panicking unnecessarily” and the symptoms she had seen were “extremely mild.”

After turning higher over the course of Wednesday's session, stocks showed a substantial move back to the downside during post-holiday trading on Friday. With the steep drop on the day, the major averages fell to their lowest closing levels in at least a month.

The major averages all finished the day sharply lower. The Dow tumbled 905.04 points or 2.5 percent to 34,899.34, the Nasdaq slumped 353.57 points or 2.2 percent to 15,491.66 and the S&P 500 sank 106.84 points or 2.3 percent to 4,594.63.

For the holiday-interrupted week, the Nasdaq plummeted by 3.5 percent, while the S&P 500 and the Dow plunged by 2.2 percent and 2.0 percent, respectively.

The sell-off on Wall Street came following reports a new and possibly vaccine-resistant coronavirus variant has been detected in South Africa.

The news, which comes amid a surge in new Covid-19 cases in Europe, raised concerns the pandemic could continue to wreak havoc on the global economy.

The U.K. has issued a temporary ban on flights from six African countries in reaction to the new variant, which has also been detected in Belgium, Israel and Hong Kong.

Light volume may have exacerbated the steep drop on Wall Street, as some traders remained away from their desks ahead of an early close by the markets.

A lack of major U.S. economic data may also have kept traders on the sidelines ahead of this week's closely watched monthly jobs report.

Airline stocks moved sharply lower amid concerns about new travel restrictions, resulting in a 6.5 percent nosedive by the NYSE Arca Airline Index. The index plummeted to its lowest closing level in over ten months.

Substantial weakness was also visible among energy stocks, which plunged along with the price of crude oil. Reflecting the sell-off by energy stocks, the Philadelphia Oil Service Index sank by 5.7 percent, the NYSE Arca Oil Index slumped by 4.3 percent and the NYSE Arca Natural Gas Index dove by 3 percent.

Banking stocks are also significant weakness amid a steep drop by treasury yields, with the KBW Bank Index plummeting by 4.2 percent to its lowest closing level in over a month.

Brokerage, steel and semiconductor stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are spiking $4.23 to $72.38 a barrel after plummeting $10.24 to $68.15 a barrel last Friday. Meanwhile, after inching up $1.20 to $1,788.10 an ounce in the previous session, gold futures are rising $2.90 to $1,791 an ounce.

On the currency front, the U.S. dollar is trading at 113.72 yen versus the 113.38 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1267 compared to last Friday’s $1.1317.

Asia

Asian stocks ended mostly lower on Monday as worries about the Omicron coronavirus variant continued to weigh on sentiment.

Some of the markets in the region settled well off the day's lows as traders indulged in some bargain hunting at lower levels.

The World Health Organization, which held an emergency meeting on Friday, declared the new virus variant a matter of concern, noting its transmissibility.

The new variant has been red-flagged by scientists over an alarmingly high number of spike mutations that might make the virus more resistant to vaccines.

The potential of more countries reinstating full lockdowns sparked worries the pandemic could once again weigh down the global economy. The confirmation of two cases of the new variant in Sydney also stoked fears.

The Australian market ended lower, with the benchmark S&P/ASX 200 Index settling at a 20-day low of 7,239.80, losing 39.50 points or 0.5 percent.

Energy, industrials and financial shares declined. Healthcare and telecom stocks were also weak, while materials and information technology stocks found support.

Data from the Australian Bureau of Statistics showed company inventories in Australia were down a seasonally adjusted 1.9 percent in the third quarter of 2021, missing expectations for a flat reading following the 0.2 percent increase in the previous three months.

Company gross profits climbed 4 percent on quarter, beating forecasts for a gain of 3 percent and slowing from 7.1 percent in the three months prior.

Wages and salaries were down 0.8 percent on quarter and wholesale trade sank 5.9 percent, the data showed. On a yearly basis, inventories rose 0.7 percent, while profits climbed 5.4 percent, wages gained 4.7 percent and wholesale sales perked 2.1 percent.

The Japanese market ended sharply lower amid continued worries about virus concerns. The benchmark Nikkei 225 Index ended down 1.6 percent, weighed down by losses in the transport, real estate and paper & pulp sectors.

On the economic front, a report from the Ministry of Economy, Trade and Industry showed the value of retail sales in Japan increased 0.9 percent year-over-year in October. That was shy of expectations for an annual increase of 1.1 percent following the 0.5 percent decline in September.

On a monthly basis, retail sales rose 1.1 percent versus expectations for a drop of 1.6 percent following the upwardly revised 2.8 percent gain in the previous month.

Chinese stocks recovered lost ground and settled roughly flat. The Shanghai Composite Index ended down or less than a tenth of a percent at 3,562.70, well off the day's low of 3,526.35. Hong Kong's Hang Seng Index declined 1 percent.

Europe

European stocks are firmly in positive territory on Monday, bouncing back strongly thanks to hectic bargain hunting following the previous session's sell-off.

Traders appear to be betting on growth despite concerns about a new variant of the coronavirus that emerged last week.

The new variant has been red-flagged by scientists over an alarmingly high number of spike mutations that might make the virus more resistant to vaccines.

According to reports, the Omicron variant has been found in the U.K., Israel, Belgium, the Netherlands, Germany, Italy, Australia and Hong Kong.

The potential of more countries reinstating full lockdowns sparked worries the pandemic could once again weigh down the global economy. Many countries, including the U.S., have already moved to restrict travel from southern Africa.

Meanwhile, Moderna's Chief Medical Officer Paul Burton said Sunday the vaccine maker could roll out a reformulated vaccine against the omicron variant early next year.

While the German DAX Index has advanced by 0.7 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 1.3 percent.

BT Group shares are spiking on reports Indian oil-to-telecom conglomerate Reliance Industries is likely to make a bid to buy a stake in the British telecom giant.

In economic news, Eurozone economic confidence weakened to a six-month low in November largely due to a deterioration in consumer sentiment, survey results from the European Commission showed.

The Eurozone economic sentiment index fell to 117.5 in November, in line with expectations, from 118.6 in the previous month. This was the lowest score since May.

The weakness in overall confidence was driven by a marked decline in consumer confidence, while sentiment remained broadly unchanged in industry and services and improved in retail trade and construction.

The industrial sentiment indicator came in at 14.1, down slightly from October's 14.2. The expected level was 13.9. At the same time, the services confidence index rose to 18.4 from 18.0 a month ago. Economists had forecast the index to fall to 16.6.

By contrast, the consumer confidence indicator declined to -6.8 from -4.8 in the previous month. The score matched the preliminary estimate.

U.S. Economic Reports

The National Association of Realtors is scheduled to release its report on pending home sales in the month of October at 10 am ET. Pending home sales are expected to increase by 1.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

At 3 pm ET, New York Federal Reserve President John Williams is due to speak during a virtual event to launch the New York Innovation Center, a strategic partnership with the Bank for International Settlements Innovation Hub.

Stocks In Focus

Shares of Moderna (MRNA) are likely to extend the rally seen in the previous session after the biotechnology company’s Chief Medical Officer said a reformulated vaccine against the omicron coronavirus variant could be rolled out early next year.

Sustainable shoemaker Allbirds (BIRD) may also move to the upside after a number of analysts initiated coverage of the company’s stock with positive ratings.

On the other hand, shares of Merck (MRK) may see initial weakness after Citi downgraded its rating on the drug giant’s stock to Neutral from Buy.
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