Wall Street set to take breather after sharp rally this week

(Reuters) – U.S. stock indexes were set to fall on Thursday after logging three straight days of gains on positive updates on the Omicron coronavirus variant, with focus now turning towards economic data for clues on the Federal Reserve’s policy decision.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2021. REUTERS/Brendan McDermid

Halliburton Co and Citigroup Inc fell 1.3% and 0.5%, respectively, in premarket trading, leading shares of major energy firms and big banks lower.

Mega-cap technology and communication stocks that led a sharp market rebound this week, including Microsoft Corp, Alphabet Inc, Meta Platforms, Amazon.com, Apple Inc, Tesla Inc and Nvidia Corp, were down between 0.3% and 0.8%.

Wall Street’s main indexes closed higher on Wednesday after test data showed the COVID-19 vaccine from Pfizer and BioNTech offered some protection against the new Omicron variant.

Markets have seesawed since late November when the World Health Organization categorized the latest variant as that ‘of concern’, with investors worried Omicron could upend a global recovery at a time when the Fed has signaled a speedier tapering of monetary stimulus to tackle surging inflation.

After falling as much as 5.24% since a record high hit on Nov. 22, the S&P 500 index has recouped nearly all its declines, now trading 0.9% below its all-time peak.

All eyes are now on consumer prices index data due on Friday. A hotter-than-expected reading could strengthen the case for aggressive policy tightening ahead of the U.S. central bank’s meeting next week.

The Fed will raise rates in the third quarter of next year, earlier than expected a month ago, according to economists in a Reuters poll who mostly said the risk was that a hike comes even sooner.

At 6:30 a.m. ET, Dow e-minis were down 104 points, or 0.29%, S&P 500 e-minis were down 15 points, or 0.32%, and Nasdaq 100 e-minis were down 70.5 points, or 0.43%.

GameStop Corp fell 4.2% after the video game retailer said it was issued a subpoena by the U.S. securities regulator back in August for documents on an investigation into its share trading activity.

A reading on weekly jobless claims, due at 8:30 a.m. ET, is expected to show tightening labor market conditions.

Meanwhile, a deal to avert U.S. debt default and raise the federal government’s $28.9 trillion debt limit will be tested on Thursday in the Senate when the full chamber votes on whether to approve the measure.

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