Stock futures, oil prices fall on omicron restrictions

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U.S. stock futures, oil prices, and bond yields fell as investors worried that a rise in Omicron Covid-19 cases would stall economic growth and add pressure to inflation. 

Futures for the S&P 500 tumbled 1.4% Monday. The index fell Friday, notching its largest weekly percentage decline in three weeks. Contracts for the tech-focused Nasdaq-100 shed 1.4% Monday, and futures for the Dow Jones Industrial Average declined 1.4%.

Some countries are imposing restrictions to stem the spread of the Omicron variant as the holiday season starts. The Netherlands on Sunday reimposed a lockdown, with all nonessential shops, bars and restaurants closed until mid-January. Irish Prime Minister Micheál Martin also announced new restrictions. President Biden plans to deliver an update Tuesday on the fight against Covid-19 in the U.S., where cases are rising.

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Trader John Romolo works on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

The rise in infections has prompted concerns that a new wave is likely to prolong supply-chain disruptions that have elevated inflation.

"We’re really seeing Omicron spread like wildfire, and it’s weighing on sentiment," said Esty Dwek, chief investment officer at FlowBank. "You’re seeing lockdowns instigated in Europe. You’re seeing more and more restrictions and the number of cases is going up so much that even if it’s less severe it could lead to more hospitalizations," which are likely to cause new restrictions that will weigh on growth, she added.

Oil prices fell amid concerns that the spread of the Omicron variant could hurt global economic growth and crimp oil demand. Brent crude futures, the benchmark in global oil markets, declined 3.1% to $71.24 a barrel. 

In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 1.366% Monday from 1.401% Friday. Investors tend to buy government bonds, seen as one of the safest assets to hold, in times of uncertainty, causing bond prices to rise and yields to fall. 

Portfolio managers whose performance is assessed on a year-over-year basis are also likely closing out their positions and locking in gains after a strong year in markets. Despite recent market volatility, the S&P 500 is up more than 20% this year. 

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Also weighing on sentiment, Sen. Joe Manchin (D., W.Va.) said he would oppose his party’s roughly $2 trillion education, healthcare and climate package, likely dooming the centerpiece of Mr. Biden’s economic agenda as currently written.

Overseas, the pan-continental Stoxx Europe 600 tumbled 2.3%. Shares of U.K. food-delivery company Deliveroo added 4.3% in London trading. 

Major indexes in Asia closed lower. South Korea’s Kospi contracted 1.8% and Japan’s Nikkei 225 shed 2.1%. Hong Kong’s flagship Hang Seng Index fell 1.9% to its lowest closing level since March 2020, according to FactSet. 

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China’s Shanghai Composite declined 1.1%. China’s central bank cut the one-year loan prime rate amid a slowing economy that has been dragged by a slump in the property sector.

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