The S&P 500 fell 1.6% to 4,579.22 by the early afternoon, with the Dow Jones Industrial Average and the Nasdaq Composite down nearly 1.8% each.
Materials and energy lagged, with all sectors in the red.
The 10-year US Treasury yield dropped 7 basis points to 1.46%, the lowest level in three weeks. Risk-off sentiment taxed West Texas Intermediate crude oil futures, which fell $2.84 to $67.11 per barrel, the weakest in about three months.
Moderna (MRNA) Chief Executive Stephane Bancel told the Financial Times current vaccines will likely be less effective against the omicron variant, which was recently discovered in South Africa and has since spread rapidly in Europe. "All the scientists I've talked to... are like, 'This is not going to be good,'" he said. It will take months to produce a vaccine specific to the variant on a mass scale, Bancel added.
There were also reports omicron might render antibody drugs from Regeneron (REGN) and Eli Lilly (LLY) less effective, while an experimental antiviral from Pfizer (PFE) was not expected to be affected.
The Food and Drug Administration could authorize COVID-19 booster shots from Pfizer and BioNTech (BNTX) for 16- and 17-year-olds by next week, The Wall Street Journal reported. Shares of Pfizer jumped 2.5%.
Federal Reserve Chairman Jerome Powell told the Senate Banking Committee Tuesday it would be "appropriate" for the Fed's Federal Open Market Committee to discuss accelerating reductions of the Fed's asset purchases at its Dec. 14-15 meeting. Powell also said that while inflation is expected to slow next year it would be best to drop the "transitory" label as price increases spread, stressing instead the Fed does not expect recent elevated readings to leave a lasting mark on inflation expectations.
The Conference Board's measure of US consumer confidence slipped to 109.5 in November from 111.6 in October, below the average estimate of 110.9 in a Bloomberg survey, with rising prices and COVID-19 cases cited.
In the metals markets, gold was down 0.6% to $1,775.70 per troy ounce, silver slipped 0.2% to $22.71 an ounce and copper was down 1.8% to $4.26 per pound.
European stocks closed lower on Tuesday amid increasing concerns over the Omicron variant of COVID-19 and the efficacy of the existing vaccines against it.
Germany's DAX declined 1.2%, the Stoxx Europe slipped 0.9%, and France's CAC 40 fell 0.8%. The FTSE 100 in the UK dipped 0.7% and the Swiss Market Index ended down 0.5%.
Annual inflation in the euro area is expected to hit 4.9% in November, compared with 4.1% in October and negative-0.3% a year earlier, according to flash estimates released by Eurostat. The latest figure exceeds an estimate of 4.5%.
The euro area's annual core inflation climbed to 2.6% in November from 2% in October and just 0.2% a year earlier, according to Eurostat flash estimates. On a monthly basis, inflation, excluding energy, food, alcohol and tobacco, was 0.1%, compared with 0.3% in October.
The European Medicines Agency is prepared to approve COVID-19 vaccines effective against the omicron variant within three to four months, Executive Director Emer Cooke told the European Parliament on Tuesday. She told lawmakers the regulatory body is ready for the possibility existing vaccines will have to be upgraded to cope with the newly identified variant.
As expected, France's gross domestic product climbed 3% in the third quarter to reach close to pre-crisis levels, following 1.3% growth in the previous three-month period, the national statistics agency's final estimate showed. The latest quarterly figure is 0.1% below the level in the fourth quarter of 2019.
On the corporate front, Wise's (WISE.L) stock rose nearly 8% after profit in the first half of fiscal 2022 declined year over year as the financial technology company reinvested the majority of its additional gross profit and incurred exceptional costs related to its London listing.
US stocks slumped midday Tuesday with government bond yields and crude oil sank as concern mounted over the level of efficacy of existing vaccines against a new, potentially more infectious COVID-19 variant.
The Dow Jones Industrial Average dropped 1.5% to 34,593.69, with the S&P 500 lower by 1.5% and Nasdaq Composite down by 1.6%.
Materials and communication services bore the brunt of widespread declines, with all sectors in the red heading into the afternoon.
The 10-year US Treasury yield dropped 5.6 basis points to 1.47%, the lowest level in three weeks.
West Texas Intermediate crude oil plummeted $2.84 to $67.11 a barrel around midday, its weakest in about three months.
Vaccine maker Moderna's (MRNA) chief executive, Stephane Bancel, said in an interview with the Financial Times that current vaccines would be less effective against the omicron variant, which was recently discovered in South Africa but has since spread rapidly in Europe. Still, Regeneron (REGN) said data suggest its coronavirus antibody cocktail may have reduced activity against omicron.
American depositary receipts of European stocks were trading 1.16% lower at 1,103.79 on the S&P/BNY Mellon Europe Select ADR Index on Tuesday.
In continental Europe, the gainers were led by biopharmaceutical company ERYTECH Pharma (ERYP) and dating app operator Spark Networks (LOV), which climbed 12% and 6.1% respectively. They were followed by biopharmaceutical companies Calliditas Therapeutics (CALT) and Cellectis (CLLS), which rose 3.7% and 1.7%.
The decliners in continental Europe were led by biometrics company IDEX Biometrics (IDBA) and biotech firm BioNTech (BNTX), which fell 8.9% and 6.6% respectively. They were followed by biopharmaceutical company Biofrontera (BFRA) and furniture maker Natuzzi (NTZ), which lost 5.7% and 5.5%.
In the UK and Ireland, the gainers were led by biopharmaceutical company Akari Therapeutics (AKTX) and mining company BHP Group (BBL), which rose 2.1% and 1% respectively. They were followed by mining company Barrick Gold Corporation (GOLD) and biopharmaceutical company MorphoSys MOR), which were up 0.9% and 0.6%.
The decliners in the UK and Ireland were led by biopharmaceutical companies Mereo BioPharma Group (MREO) and NuCana (NCNA), which fell 6.9% and 5% respectively. They were followed by cruise line operator Carnival Corporation (CUK) and educational publisher Pearson (PSO), which dropped 4% and 3.7%.
American depositary receipts of Asian stocks were trading 0.8% lower at 1,879.43 on the S&P/BNY Mellon Asia 50 ADR Index on Tuesday.
In North Asia, the gainers were led by marketing cloud platform iClick Interactive Asia Group (ICLK) and live-streaming game platform HUYA (HUYA), which climbed 6.9% and 5%, respectively. They were followed by mobile big data platform Aurora Mobile (JG) and wealth management firm Jupai Holdings (JP), which rose 3.2% and 3%, respectively.
The decliners in North Asia were led by brand e-commerce solutions company Baozun (BZUN) and online luxury retailer Secoo Holding (SECO), which fell 13% and 7.1%, respectively. They were followed by content aggregator Qutoutiao (QTT) and wealth management firm Puyi (PUYI), which lost 6.1% and 5.3%, respectively.
In South Asia, the gainers were led by IT firms Infosys (INFY), which rose 1.7%, and Wipro (WIT), which gained 1.3%. Telecommunications operator PLDT (PHI) added 0.4% and pharmaceutical firm Dr. Reddy's Laboratories (RDY) was up 0.2%.
The decliners in South Asia were led by IT firm Sify Technologies (SIFY), which declined 2.5%, followed by digital entertainment firm Sea (SE) and business process management company WNS Holdings (WNS), which lost 1% each. Bank holding company HDFC Bank (HDB) was off 0.8%.