Stock futures rose early Tuesday morning after a rebound from a week of roller coaster rides as investors left the potential impact of the new Omicron coronavirus variant behind.
Futures on the Dow Jones Industrial Average rose 196 points. S&P 500 futures rose 0.58% and Nasdaq 100 futures rose 0.65%.
The night session followed a comeback on Wall Street, with the blue-chip Dow gaining nearly 650 points. The S&P 500 rose 1.1% on Monday, with all 11 sectors posting gains. The Nasdaq Composite turned up and ended the day up 0.9%. The rally was led by travel-related stocks like airlines and cruise lines.
“Omicron’s concerns are easing and giving way for investors to position themselves for a more restrictive Fed,” said Fiona Cincotta, chief financial analyst at City Index. “Markets are rolling back the potential economic damage Omicron could cause as initial reports suggest the new variant of COVID is less severe.”
Investors are betting that the new strain of Covid-19 could cause less severe disease than feared. White House senior medical advisor Dr. Anthony Fauci said Sunday that the initial data on the variant was “encouraging,” but warned that more information would be needed to fully understand it.
Meanwhile, investors are also weighing the likelihood that the Federal Reserve would begin lifting its massive pandemic easing and raising interest rates sooner than expected.
Comments from Fed officials suggest the central bank will likely decide at its December meeting next week to double the pace of its reduction to $ 30 billion a month. Initial talks could begin as early as the December meeting about when and by how much interest rates should be raised in the next year.
“After last week’s roller coaster ride in the markets, traders are likely to be at a crossroads,” said Chris Larkin, managing director of trading at E-Trade Financial. “On the one hand, Omicron may pose less of a threat, but on the other hand, the Fed could potentially accelerate the tightening so we could see some shifts in the market.”
Market focus will shift to the new inflation data later this week. The consumer price index, which is expected to get even hotter than last month, could be the trigger for the Fed to tighten its policy more quickly.