Markets sank Monday, and Wall Street was headed to extend last week’s losses, as investors took in the latest grim forecasts about the sudden surge in the omicron variant of the coronavirus and after a critical setback in President Joe Biden’s efforts to pass a comprehensive domestic policy bill.
The S&P 500 fell about 1.7%. The index fell nearly 2% last week.
“The rampant nature of omicron and its potential impact in sharply slowing global growth is continuing to unnerve investors,” Susannah Streeter, an analyst at Hargreaves Lansdown, wrote in a note to clients. “Uncertainty about the year ahead is rippling through the markets.”
Despite its recent wobbles, the S&P 500 is still up 21% this year.
In the White House, the future of Biden’s $2.2 trillion domestic policy bill was put in doubt after Sen. Joe Manchin, D-W.Va., said he would vote against it because he feared it would inflame inflation.
The impact began to weigh on prospects for the U.S. economy, adding to negative sentiment in markets. Goldman Sachs said in a research note that it would scale back its projected growth for the economy next year and now expected 2% growth in the first quarter, down from 3%. Researchers at the bank said Congress could pass some version of the bill, with a focus on manufacturing and supply chain issues.
Investors are also grappling with the prospect that the Federal Reserve might raise interest rates next year, a policy move designed to quell inflation.
Over the weekend, more European countries announced restrictions to control the spread of the coronavirus.
And Germany’s central bank, the Bundesbank, said it would scale back its predictions of economic growth because of recent pandemic restrictions. Markets in Europe were down 1% to 2%, with the Stoxx Europe 600 closing 1.4% lower. Asian indexes closed lower.
Airline and travel stocks fell sharply in midday European trading. But the biggest decliner in Britain’s FTSE 100 was Informa, which organizes large in-person events. It fell 5.3%, after shedding as much as 6.9% earlier.
The spread of the new variant has also prompted companies to go fully remote, to bar nonessential staff from the office and to cancel mass gatherings. CNN and JPMorgan Chase are among the companies that have set renewed work-from-home models. The World Economic Forum announced Monday that it was postponing its annual meeting in Davos, Switzerland.
Economists say the prospect for a year-end rise in the stock market is marred because of news on the omicron variant. At the same time, trading is generally light during the holidays, making the market more volatile.
“Given the amount of downside risks going into the new year, it’s hardly surprising to see investors adopting a more cautious approach as they log off for the holidays,” Craig Erlam, a senior market analyst at OANDA, wrote in a note.
Manchin’s assertion that he could not support the domestic policy bill — which would provide tax credits of up to $12,500 for consumers buying electric vehicles — appeared to weigh on the stocks of automakers Monday. Car companies are investing heavily in production of electric vehicles, believing they will make up an increasing share of the auto market in the years ahead.
Shares in Lucid plunged 5.9% and have fallen nearly one-third from their high. Rivian was down 7.7% Monday and has lost nearly half of its value since its peak last month. And Tesla shares were down 3.3% and have shed more than one-quarter of their value since their peak last month.
Investors bid up stock in Ford Motor and General Motors this year as those companies moved to make electric vehicles a big part of their product lines. Ford stock was down 3.1% Monday but was still up 118% for the year. GM fell 2.9% Monday but has gained 28% this year.
The bill would have extended and increased existing tax credits; Lucid and Rivian would still benefit from credits available under the current program.
Oil prices also fell Monday. Futures of West Texas Intermediate, the U.S. benchmark, dropped more than 5% to $66.77 a barrel. Energy stocks were among the worst performers in the S&P 500, with Devon Energy Corp. down 5.2% and Enphase Energy 5.7% lower.
This article originally appeared in The New York Times.