New York – Outbreaks of a resurgence of declining stocks from Wall Street to Tokyo on Monday were triggered by fears that the virus’ rapidly spreading variant could boost the economy’s strong recovery.
The S&P 500 was down 68.67 or 1.6% to 4,258.49 after hitting a record a week ago. As another sign of concern, the 10-year treasury yield touched a five-month low as investors chased for safer places to put their money.
The Dow Jones Industrial Average was down 725.81 or 2.1% at 33,962.04 and the Nasdaq Mix was down 152.25 or 1.1% at 14,274.98.
As in the early days of the epidemic in February and March 2020, airlines and other companies most vulnerable to COVID-19 restrictions suffered huge losses. United Airlines lost 5.5%, mall owner Simon Property Group dropped 5.9%, and shipping operator Carnival fell 5.7%.
Many European markets fell around 2.5% and Asian indices slightly lower, and sales also came around the world. Meanwhile, the price of U.S. crude fell more than 7%, allowing OPEC and its allies to produce more oil this year after agreeing on Sunday.
Increased Concerns About the Virus Masks are coming, or already existing, in many parts of the world, thanks to the COVID-19 vaccine. But according to the World Health Organization, cases and deaths are triggered by a highly contagious delta variant, after a global decline. Depending on how tightly the world economy is connected, a success anywhere will soon affect the other side of the world.
Even in the United States, where the vaccination rate is higher than many other countries, people in Los Angeles County have to wear masks again at home.
Nationwide, the number of COVID cases has risen nearly 20,000 in the past two weeks to 32,000. The vaccination campaign has hit a wall, with daily average immunizations dropping to an all-time low since January, and cases are on the rise in all 50 states.
That is why the markets are worried, and the general expectation is that the economy will continue to grow, despite reports that it is still recovering at an astonishingly high rate. As viral trends worsen, the economy is threatening higher stock prices based on expectations that it will fulfill those high forecasts.
Financial markets have been showing signs of increasing concerns for some time, but the US stock market has been largely volatile. The S&P 500 has cut two weeks in the last eight weeks, the last time it had a 5% decline.
Many analysts pointed to the background of higher prices and more quiet movements for weeks as Monday divided the fall.
“It was an exaggerated act, but when you had a record high market, it was a kind of run for us, with almost no setbacks, and it was very vulnerable to any kind of bad news,” said Randy Friedrich, vice president of trade and derivatives at Charles Swabil. “With concerns about the delta variation,” it’s a matter of what a key point it is, it seems we finally reached this morning.
He and other analysts believe stocks could recover quickly. Investors were recently trained as an opportunity to buy every drop in the stock at a lower price.
Barry Bunnister, Stifel’s leading role strategist, is very pessimistic. He says the stock market may be in the early stages of a fall of up to 10% following its big run. The S&P 500 almost doubled after hitting its base in March 2020.
“Estimates, they’ve become very lungy,” he said. “There was so much hope.”
The bond market is loud and diligent in its warnings. The 10-year Treasury yield is moving in line with expectations for economic growth and inflation, and has been around 1.75% since the end of March. It fell to 1.20 per cent on Monday from 1.29 per cent late on Friday.
Analysts and professional investors say there is a long list of possible reasons behind sharp moves in the bond market, which is considered more rational and sober than the stock market. But at heart the economy is in danger of moving sharply from its current, highest growth.
Aside from the new variants of the corona virus, the U.S. government’s fading mitigation efforts and a Federal Reserve are expected to begin withdrawing its assistance to markets later this year.
The selling pressure was widespread on Monday, with shares of the S&P 500 down nearly 90%. Big Tech stocks also fell, with Apple down 2.7% and Microsoft down 1.3%. During the previous session, such stocks appeared to be almost immune to viral fears, which increased with expectations of continued growth regardless of the strength of the economy.
Across the S&P 500, analysts forecast nearly 70% profit growth in the second quarter from a year earlier. It will be the strongest growth since 2009 as the economy emerges from the Great Recession.
But as concerns grow that growth in the economy has already picked up, analysts are trying to manipulate how much growth rates will slow in the coming quarters and years for corporate profits.
Contributed by Andhra business writer Yuri Kagayama.