Stocks sank on Friday after reports that a new Covid variant was spreading fast in South Africa.

The new strain, which the World Health Organization (WHO) has dubbed 'omicron,' has labeled it a "variant of concern."

It will take weeks to understand the severity of this new variant. But the big fear is that it might be more transmissible, and have greater resistance against the vaccines.

As such, strong precautions are being taken to restrict travel to and from South Africa. This includes the U.S., along with the U.K., Germany, France, Italy and others. All in all, roughly a dozen countries have imposed restrictions. And that list is likely to grow.

The world economy has been rebounding strongly, especially the U.S., as pandemic restrictions had loosened and life was slowly starting to get back to something closer to normal.

If restrictions begin to tighten again, that could negatively impact the recovery. That, of course, would further aggravate supply chain disruptions, and exacerbate inflation.

Friday's price action was clearly a case of "sell first and ask questions later." And the day's volatility was only magnified by the shortened trading hours and thinner post-holiday trading conditions.

In the coming days and weeks, we'll get a better sense of where we are in the fight against omicron, including whether the vaccines are an effective guard against it.

On the bright side, vaccine makers Pfizer and BioNTech, have said if adjustments are needed to combat this new strain, they were confident they could create a new one within 6 weeks and make/ship it out within 100 days.

In the meantime, we could see more volatility until more is known.

At the moment, there are no signs of the omicron variant in the U.S.

And from an economic standpoint, our economy is expected to accelerate into the end of the year.

With December typically being a strong month for stocks, that bodes well for the market.

But the omicron variant will be the new wildcard for the next couple of weeks at least.

See you tomorrow,