By Shreyashi Sanyal and Bansari Mayur Kamdar
(Reuters) – U.S. stocks edged lower on Monday on lingering worries about the Omicron variant ahead of a Federal Reserve’s meeting later this week, while Apple extended gains as it neared $3 trillion in market capitalization and kept declines on the Nasdaq in check.
Seven of the 11 major S&P 500 sector indexes fell in early trading, with only defensive plays including consumer staples, utilities and real estate gaining.
Travel-related stocks also fell after at least one patient died in the United Kingdom after contracting the Omicron variant of the coronavirus.
Shares of Carnival Corp fell nearly 6% to lead declines among cruise operators, while the S&P 1500 airlines index shed 3.4%.
“The big unknown is still the Omicron variant and we don’t know just yet how that may affect markets and the economy but as long as that uncertainty exists the volatility is probably going to remain higher,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
Apple Inc shares rose 0.8% after J.P. Morgan raised its price target on the iPhone maker’s shares to the highest on Wall Street. It was poised to become the first company in the world to hit $3 trillion in market value.
“When you see big companies like (Apple) do well, it basically means that people are gravitating towards quality. Big companies that are very profitable, that have very strong cash flows are really considered a safe haven in many cases,” Frederick said.
Wall Street’s main indexes have recouped most of their declines from late November after the new Omicron variant of the coronavirus was detected, with the S&P 500 index hitting an all-time closing high on Friday.
The Fed’s policy decision still remains a top event for markets, with bets running high that the U.S. central bank will hint at a faster tapering of asset buying and an earlier start to raising interest rates.
A Reuters poll of economists sees the central bank hiking key interest rates from near zero to 0.25-0.50% in the third quarter of next year, followed by another in the fourth quarter.
Positive updates about vaccines and antibody cocktails to combat the new variant, along with a recent reading on inflation that was in line with consensus, have also kept sentiment afloat.
At 9:58 a.m. ET, the Dow Jones Industrial Average was down 219.06 points, or 0.61%, at 35,751.93, the S&P 500 was down 15.84 points, or 0.34%, at 4,696.18 and the Nasdaq Composite was down 13.10 points, or 0.08%, at 15,617.50.
Pfizer Inc rose 3.7% as it agreed to acquire Arena Pharmaceuticals in a $6.7 billion all-cash deal. Shares of Arena surged 84%.
Declining issues outnumbered advancers for a 1.87-to-1 ratio on the NYSE and for a 1.51-to-1 ratio on the Nasdaq.
The S&P index recorded 34 new 52-week highs and one new low, while the Nasdaq recorded 24 new highs and 110 new lows.
(Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in Bengaluru; Editing by Maju Samuel)
