Uncertainty about a new emerging coronavirus strain could continue to spook markets, just as Friday’s employment report and other data in the week ahead show the economy has been getting stronger.

Stocks and other risk assets were slammed in the post-Thanksgiving session Friday on reports of a new variant in South Africa, and investors sought safety in Treasurys. Initial reports on the variant show it could be more transmissible than the Delta variant, and scientists are studying how effective vaccines are against it.

The Dow was down 905 points, or 2.5% Friday in its worse day since October, 2020. The S&P 500 tumbled 2.3% Friday to 4,594, giving it a 2.2% decline for the week.

“I think that’s going to override what else we’re going to see,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It’s a heavy data week with the ISMs and certainly payrolls, but I think this new variant is going to freeze behavior until there’s more clarity.”

Economists expect a strong payroll report Friday, with 500,000 jobs added, after October’s 531,000 payrolls. They expect the economy has shaken off the effects of the slowdown linked to the Covid delta variant, and growth in the current quarter could be far stronger than the third quarter.

The Institute of Supply Management manufacturing survey is released Wednesday, and that should show improvement.

Scott Redler, partner with T3Live.com, said many traders were caught off sides in the shortened session Friday, usually a positive one for the market, and there are key levels the market must hold in the week ahead in order to stage a yearend Santa rally.

“Right now, the market lost some momentum, but it’s not broken. It could be just fine and refuel if the 50-day moving average on the S&P 500 holds next week. It’s all very fluid,” he said.

The 50-day, at 4,527, is a widely-watched momentum indicator, and it is basically the average close of the last 50 sessions.

The market had already been losing momentum this past Monday with a bearish reversal, he said.

“On Wednesday, the market absorbed the weakness and gave traders a false sense of security which is normally a nice easy holiday-shortened session Friday,” Redler said.

Sam Stovall, chief investment strategist at CFRA, said the S&P 500 typically gains 7% between its October low and year-end close, but this year it had already gained more than 9%.

“We’re ahead of the game and due for some sort of digestion,” Stovall said on CNBC.

The Dow dipped more than 1,000 points during Friday trading. Riskier assets were down even more, with the Russell 2000 closing off 3.7% Friday. West Texas Intermediate oil futures plunged more than 12%, and bitcoin was down nearly 8%. Some investors began to reverse bets in the futures market that a strong economic rebound and inflationary pressures would pull the Fed off the sidelines sooner-than-expected.

The 10-year Treasury yield, which moves opposite price, fell to 1.48% from Wednesday’s high of 1.69%.

Investors will be looking for guidance from Fed Chairman Jerome Powell, who appears before Congress in the week ahead with Treasury Secretary Janet Yellen to discuss the coronavirus and the CARES Act stimulus package. On Tuesday, there is a hearing before the Senate Banking Committee.

“I think you have to assume the base case is the virus remains endemic, not back to being a pandemic,” said Barry Knapp, founder of Ironsides Macroeconomics. The worry is that the variant spreads and slows activity, hitting supply chains even more. That could boost inflation while slowing growth.

Knapp said there are risks for stocks, and investors need to be cautious buying the market on the decline.

Knapp said the Fed could end up accelerating the taper of its bond purchases, which would move forward the time frame for potential interest rate hikes.

“The problem with trying to buy the market overall and buying tech stocks in particular is if you buy now because it is down a couple of percent, it rallies into the end of the year and then the market sells off,” he said. For that reason, he favors dipping into cheaper sectors like energy and financials, the worst performing sectors Friday.

Oil and energy will be in the spotlight in the coming week, as OPEC+ meets Thursday. The U.S. and other governments agreed to release oil from their strategic petroleum reserves in an attempt to drive prices lower. The U.S. plans to release 50 million barrels.

OPEC+ has said it would continue to increase production by 400,000 barrels monthly, despite calls from the White House to speed up the release.

Helima Croft, head of global commodities strategy at RBC, said on CNBC there is a chance OPEC could decide to pause its own production increase because of the SPR releases.

“I think as we head into the OPEC meeting Thursday, the question is not only do they do a pause but potentially will they actually pull back some barrels because of concerns about this new variant alongside the very large SPR release,” she said.

She said the U.S. is releasing a record amount of oil. “We are going to have a lot of barrels hitting this market, as we have these concerns about new Covid lockdown restrictions,” she said. “Again, too soon to say whether governments will pull the trigger on such measures, but the market will be concerned.”

Week ahead calendar

Monday

10:00 a.m. Pending home sales

3:00 p.m. New York Fed President John Williams 

3:05 p.m. Fed Chairman Jerome Powell makes opening remarks at New York Fed event introducing the New York Innovation Center

5:05 p.m. Fed Governor Michelle Bowman

Tuesday

Earnings: Salesforce.com, Box, Hewlett Packard Enterprise, NetApp, Zscaler, Ambarella

 9:00 a.m. FHFA home prices

9:00 a.m. Case-Shiller home prices

9:45 a.m. Chicago PMI

10:00 a.m. Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen speak before Senate Banking on Coronavirus and the CARES Act

10:00 a.m. Consumer confidence

1:00 p.m. Fed Vice Chairman Richard Clarida and Cleveland Fed President Loretta Mester

Wednesday

Earnings: Royal Bank of Canada, PVH, Okta,  Five Below, CrowdStrike, Splunk, Snowflake, Synopsys

Vehicle sales

7:00 a.m. Mortgage applications

8:15 a.m. ADP private payrolls

10:00 a.m. Powell and Yellen at House Financial Services committee

10:00 a.m. Construction spending

10:00 a.m. ISM Manufacturing

10:30 a.m. New York Fed’s Williams

2:00 p.m. Beige book

Thursday 

Earnings: Ulta Beauty, Signet Jewelers, Dollar General, Express, Kroger, Toronto Dominion, Imperial Canadian Bank, DocuSign, Assana, Marvell Technology, Ollie’s Bargain Outlet, Zumiez, Smith and Wesson

8:30 a.m. Jobless claims

8:30 a.m. Atlanta Fed President Raphael Bostic

11:30 a.m. Atlanta Fed’s Bostic

1:00 p.m. Fed Vice Chairman Randal Quarles

Friday

8:30 a.m. Employment report

10:00 a.m. ISM Services

10:00 a.m. Factory orders