NEW YORK (AP) — Resurgent pandemic worries knocked stocks lower from Wall Street to Tokyo on Monday, fueled by fears that faster-spreading variants of the virus may upend the economy’s strong recovery.
The S&P 500 fell 68.67, or 1.6%, to 4,258.49, after setting a record just a week earlier. Investors scrambled to find safer investments, and the 10-year Treasury yield reached its lowest level for five months.
Dow Jones Industrial Average fell 725.81 or 2.1% to 33.962.04, while Nasdaq lost 152.25 or 1.1% to 14.274.98.
Airlines and stocks of other companies that would get hurt the mostPotential COVID-19 limitations caused some of the largest losses. This was similar to what happened in the first days of the pandemic of February 2020 and March 2020. United Airlines was unable to recover 5.5% of its losses, Simon Property Group lost 5.9%, Carnival dropped 5.7%, and Simon Property Group owned the mall.
This drop was felt around the globe, as several European markets fell by 2.5% while Asian indexes dropped a little less. After the drop, benchmark U.S. crude oil prices fell by more than 7 percent. OPEC and allied nations agreed on Sundayto allow higher oil production next year.
Increased concern about the virus People living in countries where masks can be removed, or have done so, may find this strange. However, the World Health Organization states that cases and deaths have increased worldwide after a time of decline due to the contagious delta variant. Because the global economy has such a tight connection, any hit can easily affect other parts of the globe.
Even though the U.S. vaccination rate is lower than that of many other countries in the world, it still exists. people in Los Angeles County must once again wear masks indoors regardless of whether they’re vaccinated following spikes in cases, hospitalizations and deaths.
Over the past 2 weeks, COVID incidences have risen by about 20,000 to around 32,000 in all 50 states. There has been a major halt to the vaccine campaign. The average number of inoculations per day is now at its lowest since January. Cases are also on the rise in every state.
That’s why markets are concerned, even though reports show the economy is still recovering at a fantastically high rate and the general expectation is for it to deliver continued growth. A worsening virus trend could threaten the stock market’s high price, which is based on optimistic forecasts that the economy would achieve those higher expectations.
Although financial markets show signs of increasing concern, the U.S. Stock Market has been resilient. The S&P 500 has had just two down weeks in the last eight, and the last time it had even a 5% pullback from a record high was in October.
Several analysts pointed to that backdrop of high prices and very calm movements for weeks while dissecting Monday’s drop.
“It’s a bit of an overreaction, but when you have a market that’s at record highs, that’s had the kind of run we’ve had, with virtually no pullback, it becomes extremely vulnerable to any sort of bad news,” said Randy Frederick, vice president of trading & derivatives at Charles Schwab. “It was just a matter of what that tipping point was, and it seems we finally reached that this morning” with worries about the delta variant.
Analysts like him are positive stocks will rebound quickly. Recent training has taught investors to view every stock dip as an opportunity to purchase low.
Barry Bannister of Stifel was more pessimistic. According to him, the stock market could be experiencing a 10% drop after the big price rise. The S&P 500 nearly doubled after hitting its bottom in March 2020.
“The valuations, they just got too frothy,” he said. “There was just so much optimism out there.”
It has been more vocal and consistent in warnings to the bond market. Since late March when it was hovering around 1.75%, the yield on the 10-year Treasury has been falling. From 1.29% on Friday, it fell to 1.20 percent Monday.
Professional investors and analysts agree that there are many reasons why the bonds market has been so volatile. They can be explained by a variety of factors. The bond market is more rational than the stock markets and is therefore considered to be more prudent and sober. However, the real danger is that the economy could slow from the current high rate of growth.
Aside from new Coronavirus strains, the economy is also at risk due to declining pandemic relief efforts of the U.S. government as well as a Federal Reserve set to cut back on its market assistance later in the year.
Monday’s selling pressure was widespread, with nearly 90% of the stocks in the S&P 500 lower. Big Tech stocks also fell with Apple and Microsoft both dropping 2.7% and 1.3% respectively. Such stocks seemed nearly immune to virus fears during earlier downturns, rising with expectations for continued growth almost regardless of the economy’s strength.
Across the S&P 500, analysts are forecasting profit growth of nearly 70% for the second quarter from a year earlier. It would represent the fastest growth in profit since 2009, the Great Recession ended.
But just like worries are rising that the economy’s growth has already peaked, analysts are trying to handicap by how much growth rates will slow in upcoming quarters and years for corporate profits.
Yuri Kageyama (AP Business Writer) contributed.