By Geoffrey Smith
Investing.com -- U.S. stock markets opened lower on Tuesday but were well off the lows seen by futures in the overnight session as uncertainty continued to swirl around the implications of a new dominant Covid-19 strain for the global economy and financial markets.
By 9:45 AM ET (1445 GMT), the Dow Jones Industrial Average was down 262 points, or 0.8%, at 34,874 points. The S&P 500 was down 0.6% and the Nasdaq Composite was down 0.2%.
The Dow was weighed on, and the Nasdaq supported, by the rapid change in expectations for U.S. interest rates that the news flow around Omicron has caused. Short-term interest rate futures now expect the first interest rate increase from the Federal Reserve no earlier than September, rather than in June as was the case last Thursday, before the Omicron news was discounted.
Futures had sold off heavily overnight after the Financial Times published an interview with Moderna (NASDAQ:MRNA) CEO Stephane Bancel, in which he warned of a "material drop" in vaccine effectiveness against the so-called Omicron strain. Regeneron (NASDAQ:REGN) followed up by saying that preliminary results showed that its experimental antiviral pill was also less effective against Omicron than against other variants of the disease.
However, Oxford University in England, which was behind the vaccine more commonly known as AstraZeneca (NASDAQ:AZN)'s, said there was no evidence yet that vaccines will be less effective. In addition, case numbers in South Africa, where the strain was first detected, have fallen for the last two days.
Moderna stock sold off 7.5% after Bancel's comments, while BioNTech stock fell 7.0%. Regeneron stock was more resilient, however, falling only 0.7%. BioNTech's partner Pfizer (NYSE:PFE) saw its stock even rise 1.7%. Adagio Therapeutics (NASDAQ:ADGI), which on Monday said that its experimental antibody product ADG20 performed well in early trials against the Omicron strain, rose another 50%. The stock has almost quadrupled in the last four days.
Another biotech performing well was Cumberland Pharmaceuticals (NASDAQ:CPIX), which doubled after receiving Food and Drug Administration approval for its intravenous ibuprofen solution Caldolor.
Broadly speaking, the news flow hit travel, hospitality and banking stocks hardest, without generating much in the way of gains for stay-at-home stocks such as Zoom Video - which fell 0.6% - or Amazon (NASDAQ:AMZN), which eked out only a 0.6% gain. Roblox stock continued its recent impressive run, however, rising 5.4%. Business software provider Intuit (NASDAQ:INTU) saw its stock fall 2.3% after pricing a secondary offering at a modest discount to the market.
Elsewhere, the slump in oil prices continued, but with a relatively muted impact on oil and gas stocks. Exxon Mobil (NYSE:XOM) stock fell 1.4% and Occidental (NYSE:OXY) stock fell 2.0%, but Chevron (NYSE:CVX) stock limited losses to 0.3% even as U.S. crude futures slumped another 2.8% to their lowest since early September.