Why Did the Dow Jones Drop 900 Points Today?Nov 26, 2021
Why Is The Market Down Today?
Breaking news: The Dow Jones Opened down 900 points today, the biggest decline this month, on fears of a new, powerful strain of Coronavirus. The new covid variant, B.1.1.529 -- is much more transmissible than previous strains, and fears were particularly stoked because the first two patients in South Africa where this new variant was detected were vaccinated.
New mutations of COVID 19 are capable of breakout infections even in people who are vaccinated against COVID 19. This is similar to the delta variant, but more transmissible. This is the global economy reacting to the potential of slow global economic growth, just like what was seen in 2020.
For more information on how we see the market moving forward, check out this post
The Global Economy Reacting to this new Variant
The market volatility index (VIX) is up 30% today as the market has begun a mild sell-off in the new york stock exchange. The Dow Jones Industrial Average is down 900 points as of the writing of this article. The selloff is primarily lead by travel stocks like United Airlines ($UAL), Carnival Cruse lines ($CCL) and other key stocks linked to reopening the economy. Carnival Corp has been making a strong recovery since 2020 -- but a selloff like today suggests that the stock is still very volatile.
Market Data also suggests that consumer sentiment is at all time lows after this shaky recovery.
Meanwhile, stocks that performed well during lockdown like video communications platform ZOOM ($ZM) are up 15% in response to these new, unrealized lockdown fears.
Local governments in Europe and Africa are already banning flights in response to the B.1.1.529 strain of COVID 19-- which is already more transmissible than the delta variant.
Oil Prices fell 5% as well on Friday -- more in response to the US opening it's strategic petroleum reserve than to this new variant.
Energy stocks stayed flat despite the downward pressure, as they typically perform well even in times of uncertainty on wall street.
This volatility is expected to be short-lived until scientists get better data about how much the B.1.1.529 variant spreads compared to the delta variant of 2021.
The Center for Disease Control has not announced any new guidelines to deal with the B.1.1.529 variant.
Downward Volatility is Almost Always Short-Lived
While the analysts at Moby.co are watching this situation closely -- a downward trend like this is typically short-lived. Thanks to the strategies used to bolster our economic recovery, the market is more prone to big swings like this in the short term. Long term trends are still pointing to a strong recovery--and investors need to think more long term than anything else.
This article is simply the team at moby.co compiling all the small details adding up to this volatile shift Friday Morning. Investors should never overreact to news like this. This very much a short lived trend, while it is a meaningful deceleration in our shaky economic recovery.
Dow Jones Industrial Average is Down Already
These new fears are coming on top of slowing growth, flat consumer spending and rising concerns of inflation. The market is simply more susceptible to volatility at this time. Even without the B.1.1.529 variant and more aggressive delta variant, the market appears ready for a mild correction after the economic recovery of the last two years.
Our recovery in the down jones was hitting record highs all throughout November off of growth stocks. A healthy market can take a punch like this, but premarket trading suggested that we were more prepared for a correction in the short term.
Cryptocurrencies also fell on the news, in the worst drop so far this month.
The Nasdaq Composite was also hit hard Friday morning, showing the market jitters to be completely across the whole global economy. Market Breadth here is a major concern for investors -- as this selloff is just another confirmation that economic activity may be on the decline again.
The major issue for the analysts at Moby.co is keeping an eye on the Down Jones sell off. The Dow Jones can drop pretty precipitously on news like this. Bond Yields are also on the rise--adding more current concerns to the narrative that this can trigger a more major correction in the markets.
Economic Growth may not be affected by this
State and local governments are also looking into various ways to react to the B.1.1.529 variant. No new lockdowns have been planned or announced yet. The market did not consistently fall during a period of lockdowns in response to the highly contagious delta variant that burned across the world this year. Corporate profits stayed up despite 2020 and 2021, so this volatility may be short-lived. We are still in the early days of whatever this new variant can produce.
Oil Prices were stabilizing before this -- and are now down 5% on this news.
The market has also been flat on news that the Federal Reserve will keep Jerome Powell
Travel Stocks Hit the Hardest
It has already been a tough recovery for travel stocks like American Airlines, Carnival Corp, United Airlines and others. These were the worst performers during 2020, and their tepid recovery has been all but wiped out by this news.
Investors are simply concerned that we'll have more difficult lockdowns in response to this variant than anything else. The Market has already had moments that hurt our economic recovery--but they've been short lived moments of volatility instead of long term trends.
Meanwhile, stocks that rely on the global supply chain are also reacting poorly to the news. General Motors ($GM) is down 2% on this news -- but showing signs of stability.
All-in-all, this is a concerning trend to watch. The team at Moby.co will keep an eye on this and give you the most important news as it comes out!
Follow us here at moby.co for more information.