7 Charts on the Omicron Stock Market Dive

The sell-off in the stock market sparked by the Omicron variant of the novel coronavirus was swift and steep, hitting small-company stocks and those most exposed to an economic slowdown the hardest.

Stocks bounced back broadly Thursday, but amid the volatility many stocks hit their lowest price levels in the past year, as the overall market was fresh from hitting new record highs and by Morningstar’s metrics largely overvalued. In addition, a sizable chunk of the losses came the day after Thanksgiving, when many market participants were off for a long holiday weekend, leaving prices vulnerable to wide swings.

Still, the setback is worth digging into given the scope of the losses suffered in just a few days. From Nov. 24 through Dec. 1, the U.S. stock market lost 4.2%, as measured by the Morningstar U.S. Market Index.

Small-cap value stocks saw the steepest drop, losing nearly 9% in just four trading sessions. Large-cap companies cushioned the fall across the rest of the market. The Morningstar U.S. Large Cap Index lost 3.5%, while mid-cap stocks fell 5.8%. Small-cap stocks overall lost 7.5%.

Reflecting the severity of the swift decline, a significant number of stocks were sent to 52-week lows during the downdraft. That was especially the case among shares of fast-growing companies.

Still, it’s important to keep any short-term swings in the market in context. In early November, the Morningstar U.S. Market Index hit a new record high, with year-to-date returns of 25.2%. Even after the retreat, the index finished Wednesday’s session up 19.3%.

Looking under the hood, only small-growth stocks have dipped into negative territory for the year, posting losses of nearly 4%. Meanwhile, small-value stocks are the market’s leader at 23.3%. Large-cap names remain solidly in positive territory for the year to date.

When it comes to valuations, the market decline has not led to widespread bargains. At a broad level, valuations are roughly where they were two months ago. 

During the sell-off, industrials, financial services, and energy were hit the hardest. Technology and healthcare, two sectors well-poised to thrive in the pandemic environment, were spared the brunt of the week’s losses. For the year overall, however, all sectors remain in positive territory; energy is in the lead with nearly a 50% return.

Looking at returns at an even narrower industry level, department stores, oil and gas drilling, and travel service industries--all highly sensitive to pandemic-related restrictions--took the brunt of the losses. Retailer Nordstrom (JWN) lost 37.3%, and Gap (GPS) fell 36.0%. Norwegian Cruise Line (NCLH) and Carnival (CCL) each fell roughly 20%. All four names hit new 52-week lows on Dec. 1.

Some travel service stocks avoided new lows: Booking (BKNG) and Expedia (EXPE) fell more than 11% in the last week, but Booking remains 31.6% ahead of its 52-week low from January 2021 and Expedia is 11.1% ahead of its January 2021 low.

On the retail side, Macy’s (M) fell 19.2%, and Kohl’s (KSS) was down 14.0% between Nov. 24 and Dec. 1, 2021. However, Macy’s is still 170% ahead of its 52-week low from December 2020, and Kohl’s is 36% above its 52-week low from the same period.