S&P 500 Slumps as Covid Resurgence Rattles Stocks

By Yasin Ebrahim

Investing.com – The S&P 500 plunged Monday as sharp fall in yields signaled fresh fears about the growth outlook at time when the Delta variant continues to spread.

The S&P 500 fell 2%, the Dow Jones Industrial Average fell 2.5%, or 852 points, the Nasdaq was down 1.4%.

"A plethora of macro uncertainty is now in investor crosshairs including pandemic / variant spread; reflation / inflation; future of CB policy; earnings; and geopolitical tensions (watch the ongoing escalation between U.S. & allies against China)," Mark Luschini, chief Investment strategist at Janney Montgomery Scott said in a note.

New coronavirus cases climbed in all 50 states on Sunday for the fourth day in a row on a rolling seven-day average, a rise not seen since the spring 2020 surge, Stifel said, citing Johns Hopkins University data.

This backdrop of worries has muddied the outlook for growth, prompting a sharp decline in Treasury yields, and pressuring cyclical stocks including financials and energy.

Energy fell more than 4% as U.S. oil prices dropped below $70 level after OPEC and its allies agreed to lift output at time when the delta Covid variant casts doubt on global demand.

The fears on Wall street underscored by a jump in the VIX – or so-called fear index - to a two-month high.

Financials, meanwhile, were pressured by a the fall in U.S. bonds yields, with the 10-year Treasury diving below 1.2% to hit fresh February lows.

JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) were in the red. 

Lower interest rates hurt banks' net interest margin – the difference between the interest income generated by banks and the amount of interest paid out to their lenders.

Megacap tech was no exception to the selloff, though fared somewhat better relative to beaten down cyclical stocks.

Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT, Amazon.com (NASDAQ:AMZN) were more than 1% lower.

A sea of red also washed over travel-related stocks, with airlines and cruise stocks sharply lower amid fears rising infections threaten travel demand.

United Airlines Holdings (NASDAQ:UAL), American Airlines (NASDAQ:AAL), Boeing (NYSE:BA) were hit hard, with the latter down more than 5%. While Carnival (NYSE:CCL) slumped 6%.

Fears that some restrictions could return, however, proved a boon for the stay-at-home stocks.

Teladoc Inc (NYSE:TDOC) was up nearly 3%, while Peloton (NASDAQ:PTON) and DoorDash (NYSE:DASH) rose 5%. Zoom Video Communications (NASDAQ:ZM) proved an exception, however, falling about 3% after buying cloud contact center software  Five9 in an all-stock transaction that valued the company at $14.7 billion.

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