18:49Nov 26, 2021MT Newswires

S&P 500 Posts 2.2% Weekly Decline, Bringing Index Into Red for November Amid New COVID-19 Variant Worries

The Standard & Poor's 500 index dropped 2.2% this week and fell into the red for the month as concerning details emerged about a new, fast-spreading variant of COVID-19 discovered in South Africa with many mutations, which prompted some countries to restrict travel from southern Africa.

The market benchmark ended the week at 4,594.62, down from last Friday's closing level of 4,697.96.

At the end of Wednesday's session, the index had been up slightly versus last week's close. However, it slid 2.3% in Friday's session, marking its largest Black Friday percentage drop on record, on the COVID-19 variant fears. The market had been closed Thursday for Thanksgiving Day and had a shortened session Friday, closing three hours early, as is tradition the day after Thanksgiving.

The week's tumble pulled the S&P 500 into negative territory for November; it is now down 0.2% for the month to date with just two sessions remaining in the month. However, the index is still safely in the black for 2021 with a 22% jump in the year to date.

The new COVID-19 variant, known as B.1.1.529, was identified in South Africa on Thursday, and by Friday, a number of countries including Britain, France, Italy, Singapore and Israel had already started restricting travel from southern Africa. The World Health Organization assigned the variant the Greek letter omicron on Friday and designated it a variant of concern.

It isn't yet known how the variant's mutations will affect the spread of the virus, but experts are concerned by its many mutations and worry they could make existing vaccines less likely to neutralize it.

The consumer discretionary sector had the largest percentage drop of the week, down 3.6%, followed by a 3.3% slide in communication services and a 3.2% decline in technology. Just one sector rose on the week: energy, which climbed 1.7% despite a drop in crude oil futures.

The decliners in consumer discretionary included shares of Gap () as the apparel retailer's fiscal Q3 adjusted earnings and sales missed Wall Street estimates and the company cut its full-year guidance. Gap shares plunged 28% on the week.

The consumer discretionary sector was also weighed down by shares of travel-related companies including cruise operators amid fears of more travel restrictions amid the new COVID-19 variant. Royal Caribbean Cruises () dropped 16%, Norwegian Cruise Line Holdings () shed 13% and Carnival () declined 12%.

In communication services, shares of Electronic Arts () slipped 4.8% as MoffettNathanson trimmed its price target on the stock to $151 from $156 while citing concerns with the game maker's "Battlefield 2042" video game that launched last Friday. In a note to clients, MoffettNathanson said "concerns on technical performance, game play, and core design that were voiced in the open beta in October have, for the most part, been validated in the Early Access period of the game launch over the last week."

On the upside, the energy sector's gainers included Devon Energy () and Diamondback Energy (), up 5.2% each. Both stocks received increased price targets last week from analysts at firms including Goldman Sachs.

Next week, the economic data in the final two sessions of November will include October pending home sales on Monday and November consumer confidence on Tuesday. However, investors will be most focused on November employment data being released later in the week, including ADP's monthly private sector employment report on Wednesday, the Labor Department's weekly jobless claims on Thursday and the Labor Department's November nonfarm payrolls and unemployment rate due Friday.