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The Dow just had its worst day all year

SCOTT SIMON, HOST:

The pandemic hit Wall Street again Friday. The Dow Jones Industrial Average dropped more than 900 points after the World Health Organization's worrisome statement about the new omicron variant. NPR's David Gura joins us. David, thanks for being with us.

DAVID GURA, BYLINE: Thanks, Scott.

SIMON: Worst day for the Dow all year on Friday, and that's not the only indication investors are just a little shaken, is it?

GURA: No. The Dow's sell-off was the most dramatic, Scott, and the index ended the day down about 2 1/2% after what was a really volatile day of trading. But all the major indexes dropped by more than 2% each. And while U.S. markets started to fall right after the opening bell in New York, this was really a global phenomenon. There were also sharp sell-offs in Europe on Friday and across Asia as well. This wasn't just restricted to stocks, either. Oil prices also dropped dramatically. They were down about 11%. Futures fell.

When there's a sell-off like this, investors will put their money in other assets that are perceived to be safer. They rotate out of stocks. And indeed, Scott, that's what happened on Friday. There was higher demand for U.S. government bonds, for instance.

SIMON: And we could see why this might happen with so much uncertainty over a newly identified variant, after all.

GURA: Absolutely. And something we hear over and over again from policymakers is the virus is still in the driver's seat. It is determining the pace of the economic recovery, which, as you know, is still a really fragile thing. A few weeks ago, international travel opened up again after many months. It became a lot easier to go from, say, to U.S. to Europe. And that was a signal moment. It was seen as a really important shift. Now we're seeing the opposite happen. Right after this announcement from the WHO, many governments, including the U.S., put new restrictions in place. Non-U.S. citizens, residents from eight countries - including South Africa, Mozambique and Botswana - are now under new restrictions. And that's added to Wall Street's worry.

It can learn a lot from what was selling off on Friday as well. It was a bit of deja vu from the early days of the pandemic. Travel stocks took a big hit. Shares of airlines were down, along with shares of hotel chains and cruise lines - just another indication how there's this fear a new variant could upend progress that we've seen and really set everything back. And one thing I want to add is there's - this is also kind of deja vu-y (ph) as well. On the flip side, a handful of what are called pandemic stocks did really well on Friday. The share price of Zoom went up, for instance, Scott. And the same is true of Peloton.

SIMON: David, let's note, at the same time, the stock market has been setting records all year. So how seriously should we regard a one-day drop?

GURA: Yeah, context is critical here. The sell-off happened at a time when there is record spending in this country. Unemployment is very low in the U.S. The economy is in many ways much stronger than it has been when we faced new concerns about COVID-19 before. And on top of that, right before this happened, Wall Street really rallied around President Biden's pick of Jerome Powell for a second term at the Fed Reserve.

The sell-off was also a surprise because of when it happened, Scott. Traditionally, the day after Thanksgiving on Wall Street is pretty quiet. The trading day is a few hours shorter than usual. When there are swings, they can be dramatic, in part because trading volume is so low, not much trading is happening.

Last point I want to make is you never want to extrapolate too much from one day. The stock market, as you say, has been doing incredibly well. And even though it ended the week down because of Friday's sell-off, the major indexes are still not far from setting new records.

SIMON: David, what could this new variant mean for markets in the immediate future?

GURA: A lot depends on how severe this variant turns out to be and also if there are going to be further restrictions on travel or more lockdowns. I should say we've been here before. Think back to how markets reacted after the delta variant was identified. Stocks fell, then climbed up again, continuing what's been this record-setting run. And right now, the Fed is expected to raise interest rates as soon as next year because of high inflation. If the economy were to take a big hit because of this, we could see the Fed reconsider those plans. But I want to emphasize, Scott, it's too soon to forecast what's going to happen and how much of an effect it's going to have.

SIMON: NPR's David Gura, thanks so much.

GURA: Thank you. Transcript provided by NPR, Copyright NPR.

David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.