© Reuters. File photo: October 28, 2013, Wall Street sign outside the New York Stock Exchange in New York. Reuters/Carlo Allegri
(Reuters)-The Dow Jones Industrial Average fell more than 2% on Monday amid concerns that the surge in COVID-19 cases will prevent a broader economic recovery, hit economically sensitive and travel stocks, and pushed bond yields to five-month low point.
New infections have surged in parts of Asia and England, and COVID-19 cases in the United States have soared by 70% last week, driven by the Delta variant.
All 11 S&P sectors fell in early trading, and so-called value stocks such as finance, industrials, materials and energy fell between 2.1% and 4.2%.
The banking sub-index fell 2.6%, following the benchmark and fell to a mid-February low. [US/]
Peter Essele, director of investment management at Commonwealth Financial Network, said: “The global economy is almost alive on life, and another wave of infections may trigger a lockdown, which may herald the death knell of a fragile recovery.”
The benchmark index ended its three consecutive weeks of gains on Friday, with only the defensive sector—considered relatively safe in times of economic uncertainty—increasing slightly.
On Monday, as investors once again sought safety in growth-related stocks that caused Wall Street to recover from last year’s coronavirus lows, technology stocks outperformed the broader market.
Nevertheless, as of 10:47 am Eastern Time, the Nasdaq Index still fell 1.31%.
In contrast, the index fell 2.08%, which is expected to set the worst trading day since October 2020, while the S&P 500 index fell 1.63%, the largest single-day percentage drop since May.
The CBOE Volatility Index, known as the Wall Street fear indicator, jumped to a two-month high.
Chart: With the rise of new coronavirus cases, the S&P 500 index fell from a historical high: https://fingfx.thomsonreuters.com/gfx/mkt/xlbpgqqxwpq/Pasted%20image%201626703807725.png
The stocks of travel-related companies have just started to climb after suffering huge losses due to the lockdown caused by the pandemic last year and fell again on Monday. The S&P 500 airline index fell 4.0%.
“Before the Delta variant started to gain attention, people were already pricing in a very strong recovery,” said David Grexek, managing director of investment strategy and research at Aspiriant in New York.
“Any data or news we see today will destroy that calm, low volatility and high corporate earnings scenario, and the market will react to it.”
Cruise ship Royal Caribbean (NYSE:) Group, Carnival (NYSE:) Corporation and Norwegian Cruise Line (NYSE:) fell more than 6%.
After the big banks released strong quarterly reports last week, they now focus on the earnings of technology companies, including IBM (NYSE:), Netflix (NASDAQ:), Texas Instruments (NASDAQ:) and Intel (NASDAQ:) will release reports this week.
According to Refinitiv’s IBES estimates, analysts on average expect the earnings per share of S&P 500 companies to increase by 72% year-on-year.
U.S.-listed stocks Alibaba (NYSE:) Holding, Baidu (Nasdaq:) and ride-sharing app Didi declined 2.2% to 6.1% globally, due to renewed concerns about antitrust actions taken by major technology companies.
Zoom video communication (NASDAQ:) Inc. shares fell 4.0% after the conference call service provider announced the acquisition of cloud-based call center operator Five9 (NASDAQ:) Inc. for a $14.7 billion all-stock transaction.
Five9’s stock price rose 4.6%.
Declining stocks on the New York Stock Exchange outnumbered gainers by 7.70 to 1, and the Nasdaq Stock Exchange rose by 3.88 to 1.
The Standard & Poor’s Index hit 11 52-week highs and no new lows, while the Nasdaq Index hit 13 new highs and 224 new lows.