Dec. 1 (Reuters) – Wall Street closed lower on Wednesday after an early morning rally faded as investors worried about the latest variant of the coronavirus and the first evidence of its arrival in the United States while digesting Federal Reserve Chairman Jerome Powell’s comments on soaring inflation.

After advancing to 1.9% late in the morning, the S&P 500 had abandoned its gains to turn negative late in the afternoon with the Dow and the Nasdaq.

At the end of the day, the United States Centers for Disease Control said the country had detected its first case of the Omicron variant, which had infected a person from South Africa, where the variant was initially discovered.

Earlier Wednesday, the Fed’s Powell said policymakers had to be prepared to react to the possibility that inflation might not decline in the second half of next year as expected. Read more

Wall Street had tumbled Tuesday after Powell surprised the market by signaling that the central bank would consider accelerating the withdrawal of its bond buying program at its December meeting amid a surge in inflation.

“The market is grappling with the twin concerns of the Omicron variant, which may or may not be able to escape the vaccine, and a more hawkish Powell than expected,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina. .

Wall Street had fallen sharply on Friday when it first heard about the Omicron variant, with health officials saying they had not yet determined how transmissible or dangerous the variant was and what protection the vaccines had. existing can bid against it. Read more

The market rebounded strongly on Monday as investors scoured for bargains after the sale, only to fall back on Tuesday due to comments from Powell.

“We tried to buy the trough again (Wednesday) but the news that Omicron is already there already took the bulls’ breath away,” Zaccarelli said.

According to preliminary data, the S&P 500 (.SPX) lost 54.09 points, or 1.22%, to end at 4,511.14 points, while the Nasdaq Composite (.IXIC) lost 291.76 points, or 1.88%, to 15,244.20. The Dow Jones Industrial Average (.DJI) lost 476.74 points, or 1.38%, to 34,014.22.

As the top 11 S&P sectors advanced in the early afternoon, most sectors were negative towards the end of the session. The communications services industry (.SPLRCL) was the biggest loser throughout the afternoon.

Prior to the close, the only sector growing was utilities (.SPLRCU), a more defensive sector that tends to generate interest when investors shy away from riskier bets.

Salesforce.com Inc (CRM.N) forecasts a profit for the current quarter lower than estimates as it faces stiff competition from rivals, including Microsoft, driving shares down sharply.[nL4N2SL4DM]

The World Health Organization has said it expects to have more information on the transmissibility of the Omicron variant within days, and that the agency believes existing COVID-19 vaccines will work against the variant. Read more

Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said it was not surprising to see volatility as investors digest uncertainties, including the lack of information on Omicron and the latest signals from the Fed.

However, Goodwin also pointed to the positive economic data on Wednesday, which “reminded investors that the economic and business environment for this market is really strong.”

US manufacturing activity recovered in November amid strong demand for goods. Read more

Reporting by Devik Jain, Ambar Warrick and Medha Singh in Bengaluru, Sinéad Carew in New York, editing by Marguerita Choy and Maju Samuel

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