NEW YORK (AP) -- Wall Street is joining a worldwide slump for financial markets on Monday amid worries about how badly the omicron variant, inflation and other forces will hit the economy.
The S&P 500 was 1.3% lower after the first 30 minutes of trading, following up on similar drops across Europe and Asia. Stocks of oil producers had the sharpest losses in New York after the price of U.S. crude fell 5% on concerns the newest coronanvirus variant may lead factories, airplanes and drivers to burn less fuel.
Omicron may be the scariest force hitting markets, but it's not the only one. A proposed $2 trillion spending program by the U.S. government took a potential death blow over the weekend when an influential senator said he could not support it. Markets are also still absorbing the Federal Reserve's momentous move last week to more quickly remove the tremendous support it's providing the economy because of rising inflation.
They all combined to drag the Dow Jones Industrial Average down 571 points, or 1.6%, to 34,794, as of 10 a.m. Eastern time. The Nasdaq composite fell 1.2%, while Germany's DAX lost 1.9% and Japan's Niikei 225 dropped 2.1%.
"Omicron threatens to be the Grinch to rob Christmas," Mizuho Bank's Vishnu Varathan said in a report. The market "prefers safety to nasty surprises."
With COVID-19 cases surging again, leaders of governments around the world are weighing the return of restrictions on businesses and social interactions when many people seem to be sick of them.
The Dutch government began a touch nationwide lockdown on Sunday, while a U.K. official on Monday said he could not guarantee new restrictions would not be announced this week. The Natural History Museum, one of London's leading attractions, said Monday it was closing for a week because of "front-of-house staff shortages."
In the U.S., President Joe Biden will announce on Tuesday new steps he is taking, "while also issuing a stark warning of what the winter will look like for Americans that choose to remain unvaccinated," the White House press secretary said over the weekend.
Omicron's likely impact on the economy is unclear. Besides weakening the economy by putting restrictions on businesses, another feared outcome of the omicron variant is that it could push inflation even higher. If it leads to closures at ports, factories and other key points of the long global supply chains leading to customers, already ensnarled operations could worsen even more.
Such troubles helped drive prices at the consumer level in November up 6.8% from a year earlier, the fastest inflation in nearly four decades.
But some economists argue that omicron could have the opposite effect: If the variant leads to lockdowns or scares consumers into staying home, economic activity could slow, and with it, the surging demand that has overwhelmed supply chains and driven up consumer prices.
The worst-case scenario would see the economy decelerate without providing relief from already built-in inflation.
"The rapidly spreading Omicron variant appears likely to lead to a transitory winter chill,'' economists Lydia Boussour and Gregory Daco of Oxford Economics wrote in a research report last week. They say the Federal Reserve could face a "delicate'' task figuring out how to deal with an economic slowdown that coincides with high inflation.
The yield on the two-year Treasury slumped to 0.60% from 0.66% late Friday. That's a sharp turnaround from its strong rise over recent months, built on expectations that the Fed may begin raising short-term interest rates in 2022 to quell inflation.
The yield on the 10-year Treasury slipped to 1.39% from 1.40% late Friday
In Asia, the Shanghai Composite Index slid 1.1% to 3,593.60 after China's central bank trimmed a key interest rate. The bank cut its one-year Loan Prime Rate to 0.05% but left the five-year rate and its main policy rate unchanged.
The cut is a "small step toward easing" monetary policy without changing efforts to reduce debt in real estate, Larry Hu and Xinyu Ji of Macquarie said in a report. Beijing's use of multiple interest rates "is confusing, substantially muting the signal" if only one is cut, they said