Concerns about a new COVID variant are sweeping the market

The day after the Thanksgiving holiday is usually slow but with a positive bias, but that’s not the case here on Friday. News of a new strain of COVID in South Africa hit suddenly and there is a rush to impose new travel restrictions. So far, the variant has surfaced in only four countries, but the importance of travel restrictions has now increased greatly after what happened after the initial COVID strain.

The biggest concern about this new variant is that there are several mutations that could cause it to spread faster and make current vaccines ineffective. The development of new vaccines will take a long time.

The facts about the situation are still developing, but there is fear of the unknown and markets are significantly lower. Indications around 6:50 AM ET showed the S&P 500 was down about 1.87%.

This latest news comes just as concerns have grown over how the indices have failed to reflect weakness in the broad market. There has been much debate about how the dual nature of the action would resolve itself. Panic selling over a new COVID variant was not a scenario many market strategists have anticipated.

Currently, sales are across the board, but technical conditions vary wildly between sectors and groups, so we’ll have to look to see how rotary action comes into play as this develops. We’ve already got the rotation back to “close the economy” names to some degree, as vaccine makers and stocks like Zoom Video (ZM), Netflix (NFLX), and Roblox (RBLX) trade higher. Oil and airlines are significantly lower.

This is a very emotional reaction in the beginning and market players are making the moves that reflect another economic standstill. There have been a few fears lately about variants other than Delta never gaining a foothold, but the swift response to this South African variant could help prevent it from turning into a full-blown crisis.

Many market participants wondered when the indices would finally correct and reflect what has been going on in the general market for a while. This is not the preferred way to make it happen, but sooner or later it will happen in one form or another. Our job now is to navigate the action.

I don’t plan on making significant sales in this open, but I’ll be patient before putting more money into work. Remember, this is a half day session and we close here on Friday at 1:00 PM ET.

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