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Dow futures are down 300 factors as buyers attempt to gauge Omicron's financial affect

Stock futures fell in early Tuesday trading and reversed a rally on Wall Street Monday as investors reassessed the risks associated with the new Omicron Covid variant.

Futures on the Dow Jones Industrial Average fell 300 points, or 0.8%. S&P 500 futures were down 0.65% and Nasdaq 100 futures were down 0.3%.

The reversal came after Moderna CEO Stephane Bancel told the Financial Times that he expects existing vaccines to be less effective against the new variant. The CEO told the newspaper there could be a "material decline" in the effectiveness of the current vaccines against this variant. Bancel told CNBC on Monday that it could take months to develop and ship an Omicron-specific vaccine.

Separately, Regeneron said its antibody treatment may have decreased its effectiveness against Omicron. The Regeneron share lost 3% in pre-trading.

The yield on 10-year government bonds fell further below 1.45% as investors worried the economy could slow down on the new variant. The 10-year rate lost 9 basis points to 1.44% (1 basis point corresponds to 0.01%). The 10-year government bond yield was 1.69% last week before falling below 1.5% on Friday.

The futures price decline follows the volatile past sessions as investors evaluate the impact of the Omicron. The Dow lost 905 points on Friday and rebounded 237 points on Monday.

Travel stocks, which led the decline on Friday and then rose on Monday, hit the headlines again on Tuesday in pre-market trading. Expedia Group was down 2.3%, Norwegian Cruise Line Holdings was down 3.8%, and American Airlines shares were down 3.3%.

"We have to expect that the scenarios, all the scenarios, include discoveries made by people in this country with Omicron and talk about that the vaccines are not working or that those who have had Covid have no immunity," wrote Jim. from CNBC Cramer on Twitter Tuesday. "It all leads to a sale."

Some leading pharmaceutical stocks also took a hit, with Moderna suffering the worst when the stock fell 4.2%. However, Pfizer was one of the few companies to post gains on the S&P 500, up 1.2%. Stay-at-home stock Netflix also rose 0.7%, and video conferencing guide Zoom saw shares surge 2.3%.

Key averages rose to session highs on Monday after President Joe Biden said economic bans are currently off the table and there will be no new travel restrictions.

The new variant of Covid, which was first discovered in South Africa, has now been found in more than a dozen countries, causing many to restrict travel. The World Health Organization called the Omicron strain a "questionable variant" on Friday when the Dow lost 900 points and suffered its worst day since October 2020.

Covid symptoms associated with the Omicron variant were described as "extremely mild" by the South African doctor who first sounded the alarm about the new variety. Still, WHO said it would take weeks to understand how the variant could affect diagnostics, therapeutics and vaccines.

Federal Reserve Chairman Jerome Powell will tell the Senate on Tuesday, as part of his quarterly pandemic statement, that he believes the Omikron variant poses "downside risks to employment and economic activity." This also complicates the inflation outlook further, the Fed chief said in his prepared markets, which were released on Monday evening.

"Greater concerns about the virus could reduce people's willingness to work in person, which would slow labor market progress and exacerbate supply chain disruptions," Powell said.

The CBOE volatility index, also known as the VIX or Wall Street Fear Indicator, fell during Monday's rally but still stayed above 22. The indicator rose 10 points once above 28 on Friday. The VIX was higher again on Tuesday.

"This week will be insightful to see if the investor buy-the-dip approach is still in play or if the markets are more prone to a more pronounced pullback," said Mark Hackett, director of investment research at Nationwide.

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