US Close: Omicron worries subside, solid US data

Financial markets have been on a rollercoaster ride since the middle of last week.  We wanted to believe we were getting close to the end of COVID, but the latest jitters from Omicron variant signaled the inevitable COVID winter surge might already be here. Omicron is the latest COVID test for the economic outlook and we won’t have a clear picture until a couple more weeks. Friday’s turmoil looked a lot worse given the lack of liquidity, options volatility and overall frothy levels for equities.

US stocks are rebounding as optimism grows that the Omicron variant is a cause for concern, but not a ’cause for panic’ and could potentially be the catalyst needed to get more of the country vaccinated. Investors will learn over the next couple of weeks if the Omicron variant causes more severe disease than the other variants. So far the MRNA vaccines have proved effective against other variants such as delta and optimism is that even they will eventually need to get tweaked that could be done in a few months time.

Risk appetite got a boost from both the Pfizer CEO and President Biden calmed markets nerves that we won’t go back to the darkest days of the pandemic.  The Pfizer CEO Bourla said he thinks the data will ultimately show the current vaccine will protect less against Omicron but will likely still offer some protection.  President Biden said the US won’t need shutdowns to curb the Omicron variant.

US Data

Pending home sales unexpectedly surged in October as rents skyrocketed and buyers were highly motivated as borrowing costs seem poised to increase steadily as the Fed positions itself to raise rates. US pending homes sales increased by 7.5% from a month earlier, which was a 10-month high.

The Dallas Fed Manufacturing Survey came in slightly below expectations, but still showed manufacturing activity is healthy and the outlook has dramatically improved. The index for general activity came in at 11.8, a miss of the 17.0 consensus estimate and drop from the 14.6 reading in October.  The six-month outlook almost doubled to 28.6, while the raw materials price index hit a series high.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.