'FOMC Tension and Omicron Concerns' NY Stock Market and Crypto Decline... Vaccine Stocks and Bonds Strengthen

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Baek Jong-min] The New York stock market started the week lower after last week's rally, ahead of the Federal Open Market Committee (FOMC) regular meeting where tightening policies are expected. The spread of concerns over the Omicron variant alongside monetary policy variables is interpreted as having influenced the financial market.

On the 13th (local time), the Dow Jones Industrial Average fell 320.04 points (0.89%) to 35,650.95, the S&P 500 index dropped 43.05 points (0.91%) to 4,668.97, and the Nasdaq index declined 217.32 points (1.39%) to 15,413.28.

The New York stock market showed strength in pre-market futures trading but reversed to weakness once regular trading began. Expectations that the Federal Reserve (Fed) will expand the tapering of its asset purchase program and raise interest rates in the first half of next year at the FOMC meeting on the 14th-15th pressured investor sentiment.

The Chicago Mercantile Exchange FedWatch tool expects the Fed to make its first rate hike in May next year.

After this FOMC, the Fed will release a dot plot showing members' interest rate projections. While the September dot plot focused on whether rates would rise next year, this time the focus is on how many rate hikes will occur.

FedWatch estimates at least two, and possibly up to three, rate hikes next year.

Although the US Consumer Price Index (CPI) surged 6.8% in November, increasing the likelihood of rate hikes, the 10-year US Treasury yield fell again. On this day, the 10-year yield dropped from 1.48% last Friday to around 1.42%.

Concerns that the impact of the first Omicron variant death in the UK and the first infection case in China could grow have led to a preference for safe-haven assets rather than rate hikes. The 2-year Treasury yield, sensitive to monetary policy, also declined.

In the stock market that day, airline stocks such as American Airlines, Delta Air Lines, and United Airlines all plunged sharply. Cruise line stocks like Carnival and Norwegian also fell more than 4%.

COVID-19 vaccine makers such as Pfizer and Moderna turned strong, supported by claims that booster shots are effective against the Omicron variant.

The risk-averse trend led to declines in meme stocks. GameStop fell 14%, and AMC dropped 15%.

Cryptocurrencies also joined the risk asset sell-off. According to CoinMarketCap, Bitcoin fell 6.3% compared to 24 hours earlier, trading around $46,900. Ethereum dropped 8.5%.