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Wall Street Opens Sharply Lower as Covid Concerns Flare Again; Dow Down 800 Pts

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By Geoffrey Smith

Investing.com -- U.S. stocks tumbled at the opening of a holiday-shortened session on Friday, as concerns about a new and potentially vaccine-resistant variant of Covid-19 spooked global markets, triggering a rush to reactivate pandemic trades.

By 9:40 AM ET, the Dow Jones Industrial Average was down 791 points, or 2.2%, at 35,013 points. The S&P 500 was down 1.6% and the Nasdaq Composite was, outperforming, down only 1.0%.

There were few movements across the board that weren't attributable - directly or indirectly - to the news that South African scientists had identified a new variant of the virus, known as 1.1.529, the first one to have displaced the delta variant as the most common strain in the regions where it has been identified. Travel, leisure and hospitality stocks were predictably hard hit, with cruise line stocks all falling over 10%, the Dow Jones Airlines index falling 7.2%, and the Dow Jones Hotels index falling 7.5%.

Although many new variants have been discovered over recent months, the new one differs in having a protein spike so different from the original strain (which today's vaccines were designed to combat) that health regulators fear that current vaccines may not be effective against it. So far, there is no evidence either way to suggest whether that is the case or not.

Despite the uncertainty over the effectiveness of current vaccines, the companies behind those drugs all profited immediately from the shift in sentiment. Moderna (NASDAQ:MRNA) stock, which had fallen by over 50% from its August peak at one stage earlier this month, rebounded by 22%. BioNTech (NASDAQ:BNTX) stock also surged 19% and Novavax Inc (NASDAQ:NVAX) stock rose 9.0%. In part, the move was due to confidence that the biotech companies will be able to address even a new variant with a relatively straightforward tweak to their drugs. The CEOs of both Pfizer (NYSE:PFE) and Moderna were both reported as saying that such a fix ought to be possible within three months.

That may come too late, however, to benefit retailers - notably fashion chains - whose holiday season was already in question after profit warnings earlier in the week. Gap stock and Urban Outfitters (NASDAQ:URBN) stock both fell another 4% each, while Nordstrom (NYSE:JWN) stock lost another 6.8%.

One pharma stock not to benefit from a Covid bounce was Merck (NYSE:MRK) stock, which fell 5.0% despite the possibility of an FDA panel imminently recommending its antiviral drug molnupravir for emergency use. The panel is due to meet later Friday.

Oil and gas stocks were hit by the slide in oil prices as the market moved to price in another setback to the recovery in global oil demand. U.S. crude futures were down 8.3% at $71.91 a barrel, their worst one-day drop of the year, dragging down Exxon Mobil (NYSE:XOM) stock by 5.8% and Chevron (NYSE:CVX) stock by 3.8%.

Aside from biotechs, the only stocks posting gains were largely those which had done so early in the pandemic, and which have become increasingly heavily shorted as the emergency has receded. Zoom Video (NASDAQ:ZM) stock rose 8.7% while Peloton Interactive (NASDAQ:PTON) rose 5.4%.

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