The U.S. stocks are under immense selling pressure as investors have become increasingly concerned about the new variant of the coronavirus in the U.K. The concern is that if this is a really new variant of coronavirus in the U.K. then it is highly likely that we have the same variant of this virus not only in the U.K. but also in other parts of the world especially in Europe.
Coronavirus Mutation and Lockdown
The British Prime Minister, Boris Johnson, re-introduced tougher restrictions over the weekend and as a result London went under a tougher lockdownâ€”Tier 4, meaning a full lockdown. The new draconian measures have hit the investor sentiment adversely and as a result, travel and leisure companies have been hit hard today in the U.K. and Europe. As for the S&P 500, it is the energy sector that is leading the losses and the index is set to record its worst drop in nearly four weeks.
Stock Volatility Is Back
The risk-off approach among investors brought life into an index that has been sleeping for a long time. The Cboe Volatility Index, the VIX, experienced a massive spike today. Traders pushed the volatility index to nearly a one-month high because of renewed concerns of a wave of global lockdowns and travel restrictions. The chart below shows that the index has experienced the largest one-day change since October this year.
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Stimulus Aid Package and Stocks
The Congressional leaders finally reached a deal on the pandemic relief package worth nearly $900 billion. Generally speaking, the U.S. lawmakers reaching a stimulus deal should have been positive for the U.S. stocks today. However, this is not what we have witnessed in the market, as the Dow Jones futures have been under immense selling pressure since morning.
Tesla TSLA Stock Drops Over 5%Â
Tesla stock took a massive beating today as the stock was added to the S&P 500 index. The Tesla stock plunged over 5% at the time of writing this article. Tesla’s stock price is up over 700% so far this year, and most of this is mainly due to the reason that Tesla will become part of the S&P 500, which it did today.Â
Be Aware of Coronavirus VariantÂ
In summary, investors have decided to lock in some profit after the global stock market, especially the U.S. stocks, hit another record high yesterday. The focus will remain on this new variant of coronavirus and how big its influence will be on the economy. More importantly, investors would like to know if the current coronavirus vaccine has the ability to fight this new variant. One last thing to keep in mind is that coronavirus is going to keep investors on the edge as this is not the last variant of coronavirus that we will hear about. The fact is that it is only the beginning, and if coronavirus is really changing and taking a new form, then we have serious problems ahead of us.