Sam Boughedda

Stocks fell on Tuesday, after Jerome Powell, Chair of the Federal Reserve, stated that inflation risk has increased. The central bank may accelerate the process for cutting down on bond purchases to help the economy recover.

Powell told the Senate Banking Committee that it was time to retire the word “transitory” from the Fed’s inflation vocabulary, though he hasn’t backed off on his view that price increases are temporary and would eventually ease back down.

Ominous words from vaccine executives also dampened Wall Street’s mood on Tuesday. Moderna’s CEO told the Financial Times that current Covid-19 vaccines could see a big drop in effectiveness against the new Omicron variant.

The Dow dropped more than 600 points in just half an hour trading during the U.S. session.

Omicron is the market’s latest buzz kill after signs the U.S. economy was getting back in gear. The new Omicron variant is only being recognized by travelers coming from Africa. However, travel restrictions have been appearing all over the globe.

However, travel and leisure stocks fell due to concerns of a slowdown.

The November increase in living expenses and the continuing pandemic caused a drop in consumer confidence.

Here are three things that could affect  markets tomorrow:

1. Powell’s words

The Federal Reserve chief’s hint that the bond tapering would be moved up and completed at a faster pace pushed the U.S. Dollar to a strong rally against other major currencies Tuesday, and investors will likely still be digesting the significance on Wednesday.

Powell spoke before the Senate Banking Committee. He stated, “At the moment, the economy and inflationary pressures have increased and are very strong. Therefore, I believe it appropriate to wrap up the taper on our asset purchases, maybe a few more months earlier.”

The Fed stated at the November meeting it would cut bond purchases by $15 Billion per month. 

Powell also stated that the danger of inflation rising persistently has increased. He expects inflation to be high through the next year. However, the base expectation is for it to fall over 2022.

2. Oil prices

These major oil producers nations meet next week to plan their January production levels. Many believe they will reduce their production as a response to U.S.-led countries releasing oil from national reserves in order to decrease gasoline prices. They have done their work in the past few days.

Oil prices have plunged since last week’s announcement of the Omicron variant of Covid, sparking global concerns about economic growth. Oil prices fell another 6 percent on Tuesday to $70 per barrel.

3. Pharmaceutics are in the news

Moderna Inc (NASDAQ) fell 3.5% Tuesday, after Stephane Bancel, CEO of Inc, told Financial Times that the Omicron variant would make it difficult for existing Covid vaccines to work. He predicted a “material fall” in effectiveness.

Other pharma companies also suffered. Regeneron Pharmaceuticals Inc. (NASDAQ:), fell over 1% on Tuesday after it released a statement indicating that an analysis indicated its Covid-19 antiviral cocktail may have had reduced activity against this new variant. Merck & Company Inc (NYSE:) shares were down 0.6% as it awaited an advisory panel meeting at the Food and Drug Administration, which is considering its antiviral pill.