A trader works on the floor of the New York Stock Exchange (NYSE) on November 8, 2021.
Brendan McDermid | Reuters
U.S. equity futures fell in trading overnight on Thursday as investors braced for a shortened trading day amid renewed Covid fears over a new variant found in South Africa.
Dow Jones Industrial Average futures fell more than 400 points, while those of the S&P 500 and Nasdaq 100 were both in negative territory.
The downward movement in futures came after WHO officials on Thursday warned of a new variant of Covid-19 that was detected in South Africa. The UK has temporarily suspended flights from six African countries due to the variant.
Markets were closed Thursday for Thanksgiving, so stocks posted small gains on Wednesday that stemmed the week’s losses for the S&P 500 and Nasdaq Composite.
Treasury yields climbed this week, putting pressure on high-growth stocks. The Nasdaq is down 1.3% for the week, while the S&P 500 is up less than 0.1% and the Dow Jones is up around 0.6%.
The last few weeks of the year are usually a busy time for the market, with the so-called Santa Claus rally usually creating a happy holiday season for Wall Street. The S&P 500 is up 25% year-to-date.
“I think we’re probably in a market that’s on its way for the next few weeks until we get to the next one. [Fed’s Federal Open Market Committee] meeting, ”said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “I think spending is going to be strong at the consumer level … I think when we see the November jobs report come out in mid-December, I think it will be favorable.”
“I think the potential for recalibration, re-examination or reassessment of the market is most likely to occur when the FOMC makes its announcements on [Dec. 15]. By then we will have a lot more of what we already know, ”added Ma.
Friday also marks the unofficial start of the holiday shopping season, as investors will be looking for information on Black Friday to determine the mood of the American consumer.
Retail stocks have seen dramatic moves back and forth during this earnings season. Gap and Nordstrom shares fell more than 20% on Wednesday, but Kohl’s jumped more than 10% a week ago after reporting strong sales growth.
Retail executives spoke during the quarter about how they are dealing with supply chain issues and inflation. It also remains to be seen whether the discussion of supply chain issues caused consumers to start holiday shopping earlier, potentially weighing on fourth-quarter sales.
“I wouldn’t be surprised if this was a dynamic around the holiday season,” said Sarah Henry, portfolio manager at Logan Capital Management. She added that her company was looking for companies with long-term strategic advantages rather than trying to bet on the best vacation sales results.
Wednesday also saw several strong economic reports, with personal income and consumer spending for October higher than expected and initial jobless claims hitting their lowest level since 1969. However, Core PCE, the preferred inflation gauge the Fed, remained high at 4.1%.
No major economic release is expected on Friday. The exchange will close at 1 p.m. ET Friday due to the statutory holiday weekend.