(PatrioticPost.com)- The ginned-up panic over the latest COVID variant coupled with Fed Chairman Jerome Powell’s Tuesday testimony in the Senate caused the stock market to go on a wild ride Wednesday.
An early morning rally reversed course by midafternoon after the news broke that the first case of Omicron in the US was confirmed.
The Dow Jones Industrial Average finished down 460 points by the close of trading, for a loss of 1.3 percent. The S&P 500 began the day up 1.9 percent, but by closing, was down 1.2 percent.
Investors struggled to predict how much impact the latest overblown variant would have on the economy. Much of the uncertainty stemmed not from the Omicron variant itself, but concern over the government’s response to the variant.
The markets, which began heading down Wednesday afternoon, plummeted further after the White House announced the first confirmed case of Omicron was diagnosed in someone who had just returned to San Francisco from South Africa.
During his testimony to the Senate Banking Committee on Tuesday, Federal Reserve Chairman Jerome Powell testified that the Fed may halt its support of financial markets sooner than anticipated to address the persistently high inflation.
Powell admitted that with the risk of higher inflation moving up, the Fed may have to take action to tackle the rise in consumer prices.
For months, Powell, along with Treasury Secretary Janet Yellen, had insisted that the current inflation was “transitory” and should soon settle down. His admission on Tuesday that inflation is persistent sent the markets into a panic with investors fearful that the change in Fed policy will dampen current growth stocks.
In November, the Federal Reserve began winding down its monthly purchases of Treasuries and mortgage-backed securities, putting it on pace to end the practice entirely by mid-2022. In his testimony on Tuesday, Powell said the Fed would discuss accelerating the end to the program at their upcoming meeting in mid-December.
An early wind-down of the program would signal that the Fed has opened the door to raising short-term interest rates.
A faster ramp-up in short-term rates could threaten the markets, but some analysts believe it could also indicate the Fed’s confidence in the strength of the economy.