The Dow Jones fell more than 900 points in early Monday afternoon, down 2.7%. The S&P 500 fell 2.1% and the Nasdaq fell 1.5%.
This is shaping up to be the worst day for the Dow Jones since falling 943 points at the end of October.
Investors feared the Delta coronavirus variant could threaten the U.S. economic recovery. The stocks of companies in sectors that were widely thought to benefit the most from the reopening of the economy are the hardest hit.
Energy stocks also fell following a more than 3% drop in oil prices. Chevron (CVX) and Exxon Mobil (XOM) were down almost 7%. The OPEC + group of countries also agreed this weekend to a deal to produce more oil, a move that could increase supply and lower crude prices.
Long-term bond yields have also continued to fall, a sign that fixed income investors are now far more worried about an economic slowdown induced by the Delta variant than about rising inflation fears.
The yield on the 10-year US Treasury bill fell below 1.2% for the first time since February.
But as consumer prices continue to rise, some worry about a more insidious threat: the possibility that another Covid-19 outbreak could slow the economy even as inflationary pressures increase. This is a phenomenon known as stagflation.
“The fear of stagflation will be a major concern for investors if a resurgence in Covid infections causes economies to slow down as consumer prices continue to rise,” said Peter Essele, head of global management. investments for Commonwealth Financial Network, in an email.
Small American businesses have also been particularly hard hit. the Russel 2000 (RUT) was down 1.3%. This index primarily holds shares of small-cap companies that generate more of their income from the United States than from international markets.
The still high number of unvaccinated Americans means vaccination rates have not reached the threshold needed to stop the spread of Covid-19.
Most Americans who have never been infected or have not received vaccines will likely contract the fast-spreading Delta variant, said Dr Scott Gottlieb, commissioner of the United States Food and Drug Administration on Sunday. administration, to CBS.
Forty-eight states are now seeing the number of new cases increase by at least 10% from the previous week, according to data from Johns Hopkins University.
Stocks also fell on Friday amid conflicting reports on U.S. consumer health. Retail sales rose surprisingly in June, but a measure of consumer sentiment for July showed Americans are increasingly less confident in the economy.
The CNN Business Fear & Greed Index, which examines seven measures of market sentiment, is now showing signs of extreme fear.
Stocks are still up sharply this year and from 2020 lows
But the cloud-based call center software company Five9 (FIVN) was spared the market liquidation on Monday. Shares rose 4% on video conferencing giant’s announcement Zoom (ZM) bought it for almost $ 15 billion. Zoom’s stock has plummeted.
Covid-19 vaccine manufacturer Moderna (MRNA), which is expected to be added to the S&P 500 later this week, also rallied, jumping 5%. BioNTech (BNTX), who makes a vaccine with Pfizer (PFE), was also higher. Pfizer and Johnson & johnson (JNJ), maker of a third Covid-19 vaccine, however, were both slightly lower.
Despite recent volatility, stocks are not far from record highs and are having a strong year.
The Dow Jones is still up more than 10% in 2021 and is only 3% below its all-time high. The S&P 500 has jumped 13% this year and is also only 3% off its record.
Additionally, the S&P 500 is up about 90% from its Covid-induced bear market lows in March 2020. Some strategists believe the recent sell-off presents an opportunity.
“We don’t expect a return to full closures in the US, so while the damage from the Delta variant may be significant, we are still in the ‘buy the drop’ camp,” Bryce Doty, portfolio manager senior at Sit Fixed Income Associates, said in a report Monday.