The Dow and the S&P 500 slipped on Tuesday after a warning from vaccine maker Moderna's chief executive on the effectiveness of COVID-19 shots against the Omicron variant hammered travel, energy and banking shares.
Global equity markets tumbled as Moderna CEO Stéphane Bancel also told the Financial Times that it was likely the current crop of vaccines would need to be modified.
Adding to the fears, Regeneron Pharmaceuticals Inc said its COVID-19 antibody treatment and other similar drugs could be less effective against the Omicron variant.
US stocks rebounded on Monday from Friday's deep sell-off, as investors were hopeful that Omicron would not lead to lockdowns after reassurances from US President Joe Biden.
"The old adage that markets hate uncertainty couldn't be more true and it's going toe to toe with another well-known force, investors' love of dips," said Craig Erlam, senior market analyst, OANDA.
Tech rally lifts Wall Street from Omicron-driven slump
"This whipsaw price action could become a regular feature over the next couple of weeks as information on the variant trickles out ... for now, markets will remain very sensitive to indications that vaccines may not protect us this winter as much as we hoped."
Seven of the 11 major S&P sectors declined in early trading, with energy and financials down more than 1% each.
Banks dropped 1.4%, tracking a dip in Treasury yields as safe haven demand kept bond buying high.
Travel and leisure stocks slumped, with S&P 1500 Airlines and the S&P 1500 Hotels, Restaurant and Leisure indexes sliding 1.4% each.
The small-cap Russell 2000 index also fell 0.7%.
Uncertainty about the new coronavirus variant has triggered fresh alarm at a time when supply chain logjams are weighing on economic recovery and central banks globally are contemplating a return to pre-pandemic monetary policy to tackle a surge in inflation.
At 10:11 a.m. ET, the Dow Jones Industrial Average was down 223.55 points, or 0.64%, at 34,912.39, the S&P 500 was down 13.84 points, or 0.30%, at 4,641.43.
The Nasdaq Composite was up 29.75 points, or 0.19%, at 15,812.57, lifted by gains in Apple Inc, Tesla Inc and Amazon.com.
Meanwhile, Federal Reserve Chair Jerome Powell in his prepared remarks, ahead of the testimony before US Senate Banking Committee, said, he continues to expect inflation to recede over the next year, but warned that the new coronavirus variant muddies the outlook, and prices could continue to rise for longer than earlier thought.
Meanwhile, data showed a reading on consumer confidence fell short of expectations in November.
Declining issues outnumbered advancers for a 2.08-to-1 ratio on the NYSE and a 1.58-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and 17 new lows, while the Nasdaq recorded 18 new highs and 226 new lows.