Stocks drop amid low volume; treasuries advance

Investor sentiment sagged as turmoil for President Joe Biden’s economic agenda and rising coronavirus cases spurred selloffs in stocks around the world.

Investor sentiment sagged as turmoil for President Joe Biden’s economic agenda and rising coronavirus cases spurred selloffs in stocks around the world.

All major groups in the S&P 500 fell, with lower volume ahead of the holidays potentially exacerbating market swings. Airlines, cruise operators and hotels tumbled. Moderna Inc. climbed as the company said a third dose of its COVID-19 vaccine increased antibody levels against the omicron variant, while Novavax Inc. gained as its shot was cleared by European regulators. Treasuries rose. The dollar retreated.

Goldman Sachs Group Inc. economists reduced their U.S. economic growth forecasts after Senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s roughly US$2 trillion tax-and-spending package, leaving Democrats with few options for reviving it. The Senate will still vote “very early” in 2022 on Biden’s economic agenda, Majority Leader Chuck Schumer said Monday. 

Meanwhile, Europe’s biggest countries are introducing more restrictions to curb COVID-19 cases, with U.K. officials keeping open the possibility of stronger measures before Christmas and the Netherlands returning to lockdown. Biden is planning to warn the nation on Tuesday of the perils of remaining unvaccinated, with his top medical adviser saying that hospitals may be strained.

“In our view, markets can look through omicron concerns, and the gradual pace of monetary tightening won’t bring the equity rally to an end,” UBS Global Wealth Management wrote in a note. “Overall, the latest news does not change our outlook for equities.” 

Luke Hickmore, investment director at Standard Life Investments, also recommended buying the dip. “The prospects for growth will improve rapidly from here,” he said. “The market will likely see a recovery in the new year when liquidity returns.”