Michael Yee from Jefferies and Jared Holz from Oppenheimer join 'Closing Bell' to discuss the impact of the new Covid variant and what that means for markets. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

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 level he is watching is 4,571. The 50-day 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 in Friday trading. Riskier assets were down even more, with the Russell 2000 off 3.7% Friday. West Texas Intermediate oil futures plunged more than 12%, and bitcoin was down 7.5%. 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 below 1.50% from Wednesday’s high of 1.69%.

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