Market Analysis

The major U.S. index futures are currently pointing to a notably lower open on Tuesday, with stocks likely to give back ground following the rebound seen in the previous session.

Renewed concerns about the new coronavirus variant may lead to a pullback on Wall Street after Moderna’s (MRNA) CEO said in an interview that Covid-19 vaccines are likely to be less effective against Omicron.

Moderna CEO Stephane Bancel said in an interview with the Financial Times that it would take a couple of weeks to determine how much the mutations have affected the efficacy of the vaccines currently available in the market.

“Depending on how much it dropped, we might decide on the one hand to give a higher dose of the current vaccine around the world to protect people,” Bancel said. “Maybe people at very high risk, the immunocompromised, and the elderly should need a fourth dose.”

Regeneron Pharmaceuticals (REGN) has also warned its Covid-19 antibody cocktail and similar drugs could be less effective against the Omicron variant.

Meanwhile, Federal Reserve Chair Jerome Powell is set to appear before the Senate Banking Committee this morning to discuss the pandemic and the CARES Act.

In prepared remarks, Powell said the recent surge in new Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.

“Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,” Powell said.

The potential for the intensification in supply-chain disruptions comes as Powell noted pandemic-related supply and demand imbalances have already contributed to notable price increases in some areas.

Following the sell-off seen last Friday, stocks showed a strong move back to the upside during trading on Monday. The major averages all regained ground, with the tech-heavy Nasdaq leading the way higher.

The major averages gave back some ground going into the close but remained firmly positive. The Dow climbed 236.60 points or 0.7 percent to 35,135.94, the Nasdaq spiked 291.18 points or 1.9 percent to 15,782.83 and the S&P 500 jumped 60.65 points or 1.3 percent to 4,655.27.

Bargain hunting contributed to the 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.

News of the detection of a new coronavirus variant contributed to the sell-off seen in the previous session, as traders worried the pandemic would continue to weigh on the global economy.

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."

President Joe Biden also told reporters there is no need for the U.S. to reimpose lockdowns as a result of the new variant.

The U.S. has imposed travel restrictions on South Africa and several other African nations, although Biden said he doesn't expect addition restrictions.

In U.S. economic news, the National Association of Realtors released a report showing pending home sales rebounded by much more than expected in the month of October.

NAR said its pending home sales index spiked by 7.5 percent to 125.2 in October after tumbling by 2.4 percent to a revised 116.5 in September.

Economists had expected pending home sales to increase by 1.0 percent compared to the 2.3 percent slump originally reported for the previous month.

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.

Semiconductor stocks moved sharply higher over the course of the session, driving the Philadelphia Semiconductor Index up by 4.1 percent.

Substantial strength was also visible among software stocks, as reflected by the 2.3 percent jump by the Dow Jones U.S. Software Index.

Computer hardware stocks also turned in a strong performance on the day, resulting in a 1.8 percent advance by the NYSE Arca Computer Hardware Index.

Utilities, networking and commercial real estate stocks also saw considerable strength, while tobacco stocks were among the few groups to buck the uptrend.

Commodity, Currency Markets

Crude oil futures are tumbling $2.40 to $67.55 a barrel after jumping $1.80 to $69.95 a barrel on Monday. Meanwhile, after slipping $2.90 to $1,785.20 an ounce in the previous session, gold futures are climbing $10.30 to $1,795.50 an ounce.

On the currency front, the U.S. dollar is trading at 112.73 yen compared to the 113.53 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1366 compared to yesterday’s $1.1291.

Asia

Stock markets in Asia yielded to panic and gave up much of their early gains on Tuesday after warnings by Moderna’s CEO about the efficacy of vaccines against the omicron variant rattled sentiment.

China's Shanghai Composite Index crept up 1.19 points or less than a tenth of a percent to finish at 3,563.89, as a jump by the manufacturing PMI quelled hopes of policy easing.

The benchmark Japanese Nikkei 225 Index shed 462.16 points or 1.6 percent to end Tuesday's trading at 27,821.76. The slump came as the Japanese yen jumped to the 113 per dollar level amidst safe-haven buying reignited by virus fears.

Nissan Motor tumbled 5.2 percent. Nippon Sheet Glass Co, Mitsubhishi Motors Corp, Fast Retailing Co, Nissan Chemical Industries etc. also slid by more than 4 percent.

The Hang Seng Index of the Hong Kong Stock Exchange lost 376.98 points or 1.6 percent from previous close to finish trading at 23,475.26. The day's high was at 23,888.37.

The Korean Stock Exchange's Kospi Index plunged 70.31 points or 2.4 percent to close at 2,839.01 amidst disappointing factory output data and the continuance of COVID-19 curbs.

Australia's S&P/ASX 200 Index closed trading at 7,256.00 after gaining 16.20 points or 0.2 percent. The index is currently 4.9 percent below its 52-week high of 7632.80.

Restaurant operator Collins foods surged more than 12 percent following upbeat results. Consumer finance business Credit Corp group rallied close to 9 percent following the announcement of the acquisition of Radio Rentals appliance leasing business.

Data released earlier showed that the seasonally adjusted estimate for total dwellings approved tumbled 12.9 percent to 15,911 units. Economists had expected in a 2 percent drop.

Europe

European stocks have drifted lower on Tuesday, weighed down by concerns about the effectiveness of existing Covid-19 vaccines against the newly detected Omicron variant.

While the U.K.’s FTSE 100 Index has slid by 0.8 percent, the French CAC 40 Index is down by 1 percent and the German DAX Index is down by 1.1 percent.

European markets had turned positive on Monday, rebounding from steep losses a session earlier, as worries about the new variant faded somewhat.

However, the mood in the markets is quite bearish today after Moderna’s CEO said in an interview that Covid-19 vaccines are likely to be less effective against Omicron.

Moderna CEO Stephane Bancel said in an interview with the Financial Times that it would take a couple of weeks to determine how much the mutations have affected the efficacy of the vaccines currently available in the market.

“Depending on how much it dropped, we might decide on the one hand to give a higher dose of the current vaccine around the world to protect people. Maybe people at very high risk, the immunocompromised, and the elderly should need a fourth dose,” he said.

In economic news, the flash estimate from Eurostat showed Eurozone inflation accelerated more than expected in November on energy prices.

Annual inflation advanced to 4.9 percent in November from 4.1 percent in October, exceeding the expected level of 4.5 percent, the data showed. Core inflation, which excludes energy, food, alcohol and tobacco, increased to 2.6 percent from 2 percent. Core inflation was forecast to advance to 2.3 percent.

Data released by Destatis showed Germany's jobless rate held steady at seasonally adjusted 3.3 percent in October. The number of unemployed totaled 1.40 million, which represents a decline of 17,700 or 1.2 percent from the previous month.

On an unadjusted basis, unemployment fell by 305,000 or 18.9 percent from the last year to 1.31 million.

Meanwhile, data published by the Federal Labor Agency revealed Germany's unemployment rate declined more than expected in November, falling to 5.3 percent in the month from 5.4 percent in October.

U.S. Economic Reports

Standard & Poor's is scheduled to release its report on home prices in major metropolitan areas in the month of September at 9 am ET.

At 9:45 am ET, MNI Indicators is due to release its report on Chicago-area business activity in the month of November. The Chicago Business Barometer is expected to come in unchanged at 68.4, with a reading above 50 indicating growth.

Federal Reserve Chair Jerome Powell is scheduled to testify before a Senate Banking Committee hybrid hearing on the coronavirus and the CARES Act at 10 am ET.

Also at 10 am ET, the Conference Board is due to release its report on consumer confidence in the month of November. The consumer confidence index is expected to drop to 110.7 in November from 113.8 in October.

New York Federal Reserve President John Williams is scheduled to give opening remarks before a Combating Food Insecurity: What's Working and What's Scalable? Event at 10:30 am ET.

At 1 pm ET, Fed Vice Chair Richard H. Clarida is due to speak via livestream to the Cleveland Federal Reserve on Federal Reserve Independence: Foundations and Responsibilities.

Stocks In Focus

Shares of SolarEdge Technologies (SEDG) are seeing notable pre-market weakness after Morgan Stanley downgraded its rating on the slower power equipment maker to Equal-Weight from Overweight.

Discount retailer Dollar Tree (DLTR) may also move to the downside after Goldman Sachs downgraded its rating on the company’s stock to Neutral from Buy.

Shares of Beyond Meat (BYND) and Oatly (OTLY) are also likely to see initial weakness after HSBC initiated coverage of both stocks with a Reduce rating.