By Yasin Ebrahim

Investing.com – The S&P 500 slipped Monday, as an Omicron-fueled surge in Covid-19 cases stoked worries about the  global economic recovery, sending cyclical stocks including financials sharply lower.

They fell by 1.2% and lost 1.2% (or 433 points), respectively. The slumped 1.2%

“Omicron news is dominating the headlines in the final trading days ahead of the Christmas holiday,” Stifel said following reports that the new variant had been identified in 43 out of 50 U.S. states.

The U.S. wave of Omicron is projected to “be in the steep part of its exponential growth in 2 to 3 weeks, just as we turn the corner into the new year,”Morgan Stanley said.

Cyclical stocks are those that move along with the economy. They were hardest to hit, as banking stocks had financials leading lower than U.S. Treasury yields.

Synchrony Financial (NYSE :), Lincoln National(NYSE :), Capital One Financial (NYSE: ) was among the worst-performing companies.

Falling Treasury yields hurts the net interest margin of banks – the difference between the interest income generated by banks and the amount of interest paid out to depositors.

In another blow to the outlook on the recovery, Senator Joe Manchin rejected the Biden administration’s $1.75 trillion spending program amid concerns about adding to the national debt.

Manchin later on Monday appeared to extend an olive branch, however, hinting that he would be willing to back a less costly version of the ‘Build Back Better Plan.’

Goldman cut its forecast for GDP in the first, second, and third quarters of 2022, and said “the odds [to pass the spending bill] have clearly declined and we will remove the assumption from our forecast.”

While energy was struggling to reduce losses, oil prices continued to be under pressure. However, they rebounded from their session lows.

Stocks were also affected by big tech. Apple (NASDAQ;), Amazon (NASDAQ), Facebook (NASDAQ), Google (NASDAQ), and Microsoft ended the day with a negative sentiment.

Carnival (NYSE: ) rose by 3% after forecasting profit in the first quarter of 2022. The strong advance bookings of the second half 2022-2023 drove Carnival’s growth.