Words have power -- as investors discovered to their dismay last week.
News of the new omicron variant of COVID-19 shocked the stock market, sending shares of cruise line stocks Royal Caribbean (NYSE:RCL), Carnival (NYSE:CCL) (NYSE: CUK), and Norwegian Cruise Line Holdings (NYSE:NCLH) tumbling 10% and more in Friday trading. But here on Monday, investors are starting to get more comfortable with adding "omicron" to their coronavirus lexicon -- and cruise line stocks are beginning to recover.
As of 10 a.m. ET, Royal Caribbean is back up 3.6%, Carnival stock is gaining 2.7%, and Norwegian Cruise Line shares have regained almost 2%.
Why are these stocks going back up today? In part, this may simply be a dead cat bounce caused by investors, who had been shorting cruise stocks prior to the omicron news, cashing in their gains. Personally, though, I'm optimistic that cruise stocks are rising today because the news may not be as bad as was initially feared.
Why not? As Reuters reports today, it's true that the new variant is spreading rapidly in southern Africa, and even beginning to spread beyond that region's borders. However, the chair of the South African Medical Association told Reuters that the cases of omicron that she has observed appear to cause only "very, very mild symptoms" of COVID-19.
"The most predominant clinical complaint is severe fatigue for one or two days ... headache and the body aches and pain," said Dr. Angelique Coetzee. She added that none of the omicron patients have yet had to be admitted to the hospital. "We have been able to treat these patients conservatively at home," she said in the Reuters report.
If these initial observations hold true, then it would appear that omicron might not be as serious as first reported. Indeed, the virus's ability to spread faster than delta and become the dominant strain in South Africa -- and elsewhere -- might even turn out to be a good thing if it means most people who catch it will survive it just fine.
In short, after two years of frayed nerves, Friday's panic was understandable -- and so too were world governments' swift decisions to ban international flights from southern Africa into Europe and elsewhere. But if further data show that this new variant of coronavirus is not as serious as it first appeared, then logically, long-term restrictions on travel and on tourism won't need to be reimposed.
This would be great news for investors. It would mean that despite our Thanksgiving shock, no new coronavirus-inspired recession is in the offing -- and it would mean that Carnival and Royal Caribbean could remain on track to turn profitable as early as next year, with Norwegian Cruise Line Holdings following soon after.