Wall Street Slumps On Covid, Political Worries

Wall Street's main indexes dropped more than 1 percent on Monday as investors worried about the Omicron Covid-19 variant potentially undercutting the economic rebound and a critical setback to President Joe Biden's social-spending bill.

Coronavirus cases surged in New York City and around the United States over the weekend, dashing hopes for a more normal holiday season. Britain's leader said he would take more steps to slow the spread of Omicron if needed, after the Netherlands began a fourth lockdown and as other European nations considered restrictions.

"I think (the stock market) is down over Covid fears and how those fears may extend the continuing supply-chain problems and how that will impact profits ... for companies,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

The Dow Jones Industrial Average fell 1.23 percent, to 34,932, the S&P 500 lost 1.14 percent, to 4,568 and the Nasdaq Composite dropped 1.24 percent, to 14,981.

Financials fell 1.9 percent and materials dropped 1.8 percent. Microsoft and Tesla were the biggest individual weights on the S&P 500, falling 1.2 percent and 3.5 percent respectively.

In a further knock to market sentiment, US Senator Joe Manchin said on Sunday he would not support Biden's US$1.75 trillion domestic investment bill Build Back Better, dealing it a potentially fatal blow.

After Manchin's comments, Goldman Sachs trimmed its quarterly U.S. GDP forecasts for 2022.

The developments came as the Federal Reserve decided last week to end its pandemic-era stimulus faster, with the central bank signaling at least three quarter-percentage-point interest rate hikes by the end of 2022.

Investors have taken a more defensive stance this month, with sectors such as consumer staples and utilities rising most. Those two groups ended Monday's session with slim gains, the only sectors in positive territory.

The S&P 500 remains up 21.6 percent so far in 2021. (Reuters)