Fear, Not Calculated Trading, Is Behind Today’s Covid Market Crash - Barron's

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Travellers arrive at Covid-19 Testing location at the airport in Los Angeles, California (Photo by FREDERIC J. BROWN/AFP via Getty Images)

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Gathering over Thanksgiving may have lulled many into feeling that the pandemic is over. Looking at the stock market today will shatter that illusion .

Concerns around a new, heavily-mutated variant of Covid-19 identified in South Africa have rocked investor confidence. Stocks are plunging around the world, oil prices are dropping, bond yields are sliding—even Bitcoin is feeling the heat. There is a broad reversion to frenzied, theme-based trading. Vaccine stocks and pandemic plays like Zoom are surging while airline stocks are falling.

What we are seeing is fear and uncertainty. Sell first, ask questions later. And low trading volumes globally due to the Thanksgiving holiday is likely exacerbating volatility.

What we are not seeing is markets intelligently pricing in the impact of this new development. Scientific experts have yet to draw conclusions about the mutation, known for now as B.1.1.529, and there are less than 100 confirmed cases.

That’s not to say fear is misplaced. Early indications are that B.1.1.529 is significantly different from other variants, and, truly, the worst case scenario is that it’s more deadly, contagious, and vaccine-resistant than what we’ve already faced.

But we don’t know that yet. Similar market shockwaves caused by the Delta variant over the summer eventually subsided. Though it led to a surge in cases around the world, modern science was able to tackle it and move on. Hopefully the same can be said of this variant.

But for now investors will have to put up with heightened uncertainty—the markets’ worst enemy.

—Jack Denton

*** Join MarketWatch editor Jeremy Olshan and economist Stephanie Kelton as they talk to leaders in business, tech, finance, and government about the next phase of money’s evolution, and meet real people whose lives are being changed as these new ideas are put to the test. Listen to the Best New Ideas in Money podcast.

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New Covid-19 Variant Triggers Wave of Travel Restrictions

European and Asian governments were scrambling Friday to impose new travel restrictions over concerns that a heavily mutated coronavirus strain, first identified in Botswana, could prove vaccine-resistant and possibly spread faster than previous variants.

• The strain, called B.1.1.529, is “themost worrying that we’ve seen,” according to Dr. Susan Hopkins, the chief medical advisor to the U.K. Health and Security Agency. However, the data is limited and experts are working to understand its true impact.
• The U.K., Germany, Italy and Singapore Friday imposed bans on entry from South Africa and neighboring African countries, and the European Commission is proposing member states to activate the “emergency brake” allowing a ban of air travel from the region.
• The World Health Organization is due to meet Friday to decide whether to classify the new variant as one “of interest” or, more seriously, “of concern.”
• According to a South African scientist 90% of the cases in the Gauteng region around Johannesburg are due to the new strain. Hong Kong and Israel officials said they had already identified cases of the new variant in travelers that had been to South Africa.

What’s Next: Beyond the immediate travel bans, the fear of the virus, if it persists in the next few days, is likely to lead to restrictions even more severe than the ones that were already being considered to counter the current, fast-spreading wave of the virus in Europe.

—Pierre Briançon

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With So Many Black Friday Deals, What Not to Buy

Nearly 2 million more people than last year are expected to shop this weekend through Cyber Monday, with two-thirds of them planning to visit stores in person today to hunt for Black Friday deals. Higher consumer prices may make bargain-hunters pickier, MarketWatch reported.

• Sony PlayStation 5s and Microsoft ’s Xbox Series Xs gaming systems and consoles have been especially scarce during the microchip shortage and supply chain delays, and are unlikely to be discounted, “so don’t make them your focus,” said RetailMeNot’s The Real Deal editor Kristin McGrath.
• Exercise equipment, such as a Peloton bicycle or even free weights, tends to go on sale closer to the end of December, as people resolve to get healthier for the new year. Black Friday TV deals are often for outdated models. Newer TVs come out closer to the Super Bowl.
• Clothing discounts tracked by Slickdeals are running about the same as prior Black Fridays, around 30%, but shoppers are facing comparatively higher presale prices this year. Better deals might come later as stores clear out inventory to make room for the next season, MarketWatch reported.
• Furniture is also another tough sell, unless a new couch or table is absolutely needed now, McGrath told MarketWatch. Big furniture sales tend to come around Presidents Day in February.

What’s Next: The NRF estimates 58.1 million people will shop on Small Business Saturday, and 62.8 million will shop online on Cyber Monday. It projects consumers will spend an average of $997.73, with total spending up as much as 10.5% to $859 billion.

—Janet H. Cho

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Thanksgiving Weekend Travel Surge Tests Largest U.S. Airlines

The surge of airline passengers this weekend, projected to reach 20 million for the nine days through Sunday, will test the ability of the nation’s largest airlines to handle the largest jump in travel demand in nearly two years.

• American Airlines is offering employees time-and-a-half pay for working peak days, and a $1,000 bonus for perfect attendance from Nov. 15 to Jan. 2. JetBlue is offering $1,000 to flight attendants who don’t call out from work through early January.
• Southwest Airlines , which canceled more than 2,000 flights one October weekend and cut its flight schedules in November and December, is hiring 5,000 more employees this fall and winter. Delta Air Lines also hired staff in anticipation of 5.6 million passengers from Nov. 19 to 30, with Sunday the busiest day.
• More than 2.3 million travelers passed through U.S. airport security checkpoints on Wednesday, a new pandemic high and the seventh straight day passenger counts have surpassed 2 million, according to the Transportation Security Administration.
• The Justice Department is prioritizing prosecutions for crimes committed on commercial planes, with an incident information-sharing arrangement with the Federal Aviation Administration. Eight people face collective FAA fines of $161,823 for behavior involving alcohol.

What’s Next: European air travel was expected to be strong next year, but new lockdowns to slow another surge in Covid-19 cases could threaten the industry’s recovery. The U.S. is advising against travel to Germany and Denmark.

—Janet H. Cho

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Do you remember this week’s news? Take our quiz below about this week’s news. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Vonage has been under pressure from the activist firm, Jana, to sell itself since late summer. Which telecom is buying the cloud-based telecom company, in a deal valued at $6.2 billion?

a. Nokia
b. Ciena
c. Ericsson
d. NetScout Systems

2. The Biden administration announced that the U.S. will tap its national strategic petroleum reserve to help bring down gasoline prices which have fueled inflation. What other country also announced plans to tap its oil reserve?

a. China
b. India
c. U.K.
d. All of the above

3. The cost of an average Thanksgiving dinner is up by 14% this year according to the Farm Bureau. How much has the cost of a 16-pound turkey risen this year?

a. 24%
b. 34%
c. 44%
d. 54%

4. Where is Samsung Electronics, the South Korean tech giant, planning to build a chip-making plant valued at about $17 billion?

a. Arizona
b. Texas
c. Georgia
d. Tennessee

5. In celebration of its 95th anniversary, Macy’s is auctioning 10 NTFs, or nonfungible tokens, of its Thanksgiving Day parade balloons with proceeds going to the Make-A-Wish Foundation of America.The balloons include:

a. Firefighter from the 1940s
b. Spaceman from the 1950s
c. Macy’s Star from the 1970s
d. All of the above

Answers: 1(c); 2(d); 3(a); 4(b); 5(d)

—Barron’s Staff

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—Newsletter edited by Liz Moyer, Callum Keown, Rupert Steiner

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