Stock futures opened higher Tuesday evening after a technology-led rally during the regular trading day, as investors looked through concerns over the Omicron variant and a potential policy pivot by the Federal Reserve.
Contracts on the Nasdaq Composite opened in the green. Earlier, the index closed higher by more than 3%, posting its best day since March. The S&P 500 and Dow also advanced solidly, rising more than 2% and 1.4% during the session, respectively. Treasury yields climbed, and the 10-year Treasury note gained nearly 5 basis points to trade just below 1.5%.
Pfizer (PFE) shares traded little changed to slightly lower Tuesday evening after data from a study in South Africa suggested the vaccine’s two-dose inoculation saw only partial effectiveness against the Omicron variant. However, other developments around the virus have been more upbeat, with Dr. Anthony Fauci telling the AFP on Tuesday that Omicron infections are “almost certainly” not more severe than those caused by the previous Delta variant. Public health officials and vaccine-makers are still collecting data to further assess the extent of the transmissibility and severity of illness caused by the Omicron variant.
Investors have snapped up shares of technology and growth stocks that had lagged the broader market in recent sessions on Tuesday. Heavily weighted tech giant Apple (AAPL) extended gains into late trading after reaching a fresh all-time high.
“Economic growth is going to be strong. Certainly the Omicron variant could possibly push some of that out, but it won’t eliminate it given the underlying fundamentals,” Brent Schutte, chief investment strategist for Northwestern Mutual, told Yahoo Finance Live. “And the Federal Reserve certainly will focus a bit more on tapering — that kind of spooked the market — but ask yourself: What impact is that going to have on growth? The answer to us is not much. You are still going to have a strong U.S. economy next year on the back of reopening, on the back of all the cash that is still available on the consumer balance sheet.”
Other strategists echoed these sentiments.
“We do think that there is fundamental support there for markets to continue to move higher here,” told Emily Roland, co-chief investment strategist at John Hancock investment management. “Obviously we had a couple of things spook us over the last week or so, the emergence of the Omicron variant as well as this pivot from the Fed, potentially seeing them accelerating their tapering of asset purchases here. But the bottom line is that the economy is strong.”
“So until it looks like we’re inching closer to a recession here, which we’re nowhere near at this point, it’s hard for us to get too defensive,” she added. “We continue to embrace equities, we like the U.S. the most, that’s where we’re seeing the best relative economic growth, that’s where we’re seeing the best relative earnings growth. And again, the other element here is that there is a ton of cash on the sidelines that’s looking to get put to work.”