The Dow fell more than 2% on Monday as fears that a rise in COVID-19 cases would halt a broader economic recovery plunged economically sensitive and travel stocks and pushed bond yields to a five-month low.
New infections rose in parts of Asia and the UK, while US COVID-19 cases rose 70% last week, driven by the Delta variant.
All 11 S&P sectors fell in morning trading, with so-called value stocks including financial, industrial, materials and energy falling between 2.1% and 4.2%.
The banking index fell 2.6% and tracked a decline in the benchmark 10-year government bond yield to mid-February. [US/]
“The global economy is barely surviving life support, and another wave of infections could spur lockdowns that could signal the death toll for the heavy recovery,” said Peter Essele, head of investment management for the Commonwealth Financial Network.
The Benchmark S&P 500 snatched a three-week winning streak on Friday, with only defensive sectors – perceived as relatively safe in times of economic uncertainty – posting small gains.
On Monday, the technology-heavy Nasdaq index surpassed the broader market as investors once again sought safety in the growth-related stocks that led Wall Street’s recovery from its coronavirus low last year.
Still, at 10:47 am ET, the Nasdaq fell 1.31%.
By comparison, the Dow Jones Industrial Average fell 2.08% and was on track for its worst session since October 2020, while the S&P 500 fell 1.63%, setting its biggest one-time drop since May.
The CBOE volatility index, called Wall Street’s fear meters, jumped to a two-month high.
Shares of travel-related businesses, which had just begun to climb after suffering heavy losses during pandemic-driven lockdowns last year, fell again on Monday. The S&P 500 Airlines index fell 4.0%.
“Before the Delta variant began to gain traction, things were priced for a very strong recovery,” said David Grecsek, CEO of Investment Strategy and Research at Aspiriant in New York.
“What we see today is data or news that is going to disrupt that kind of peaceful scenarios with low volatility and high earnings, and the market will respond to that.”
Cruiseliners Royal Caribbean Group, Carnival Corp and Norwegian Cruise Line fell more than 6%.
Following strong quarterly reports from major banks last week, the focus is now shifting to technical earnings with companies including IBM, Netflix, Texas Instruments and Intel due to report this week.
Analysts expect an average of 72% year-on-year growth in earnings per year. Share for S&P 500 companies, according to IBES estimate data from Refinitiv.
US listed shares in Alibaba Holding, Baidu and the riding-sharing app Didi Global fell between 2.2% and 6.1% due to renewed fears of anti-monopoly action against major technology companies.
Zoom Video Communications Inc slipped 4.0% after teleconferencing service provider announced a total of $ 14.7 billion dollars to buy cloud-based call center operator Five9 Inc.
Five9’s shares ran by 4.6%.
Falling issues exceeded the number of advances 7.70-to-1 on the NYSE and 3.88-to-1 on the Nasdaq.
The S&P index recorded 11 new 52-week highs and no new lows, while the Nasdaq recorded 13 new highs and 224 new lows.
(Reporting by Devik Jain in Bengaluru; editing by Sriraj Kalluvila, Maju Samuel and Sagarika Jaisinghani)