(AP) — Stocks fell across the board on Monday, from Wall Street
, as investors worried that faster-spreading variants of the virus could derail the economy
's strong recovery.
The S&P 500 fell 68.67 points, or 1.6%, to 4,258.49 after setting a new high just a week earlier, and the 10-year Treasury yield fell to its lowest level in five months as investors sought safer havens for their funds.
The Dow Jones Industrial Average fell 725.81 points, or 2.1%, to 33,962.04, while the Nasdaq
Composite dropped 152.25 points, or 1.1%, to 14,274.98.
Airlines and stocks of other companies that would be most harmed by potential COVID-19
restrictions suffered some of the biggest losses, mirroring the early days of the pandemic
in February and March 2020. United Airlines
lost 5.5%, mall owner Simon Property Group lost 5.9%, and cruise operator Carnival lost 5.7%.
The drop reverberated around the world, with several European markets falling roughly 2.5% and Asian
indexes falling slightly less, while the price of benchmark US crude fell more than 7% after OPEC and allied nations agreed on Sunday to allow for higher oil
production this year.
Increased concerns about the virus may appear strange to people
in parts of the world where masks
are being removed, or have already been removed, as a result of COVID-19 vaccinations
. However, the World Health Organization
reports that cases and deaths
are increasing globally after a period of decline, owing to the highly contagious delta variant
Even in the United States
, where vaccination rates are higher than in many other countries, people in Los Angeles County
, regardless of vaccination status, must once again wear masks indoors due to an increase in cases, hospitalizations, and deaths.
The daily number of COVID cases in the United States has increased by nearly 20,000 in the last two weeks to around 32,000, the vaccine
campaign has hit a snag, with the average number of daily inoculations falling to the lowest level since January, and cases are on the rise in all 50 states.
That is why markets are concerned, even though reports show the economy is still recovering at a fantastically fast rate and the general expectation is for continued growth; any worsening of virus trends threatens the high prices that stocks have achieved on the expectation that the economy will meet those lofty forecasts.
Financial markets have been showing signs of increased concern for some time
, but the US stock market has remained largely resilient: the S&P 500 has only had two down weeks in the last eight, and the last time it experienced a 5% pullback from a record
high was in October.
Several analysts have been discussing Monday's drop for weeks, pointing to the backdrop of high prices and very calm movements.
“It’s an overreaction, but when you have a market at record highs, that’s had the kind of run we’ve had, with virtually no pullback, it becomes extremely vulnerable to any sort of bad news
,” said Randy Frederick, vice president
of trading and derivatives at Charles Schwab.
He and other analysts believe stocks will quickly recover; investors have recently been trained to view every dip in stock prices as an opportunity to buy low.
According to Barry Bannister, chief equity strategist at Stifel, the stock market is in the early stages of a 10% drop following its big run higher in prices. The S&P 500 nearly doubled after hitting bottom in March 2020.
“The valuations just got too frothy,” he said, referring to the overabundance of optimism in the market.
The bond market has become more vocal and persistent in its warnings; the yield on the 10-year Treasury note tends to move in tandem with expectations for economic growth and inflation, and it has been falling since late March, when it was around 1.75%; it fell to 1.20% Monday, down from 1.29% late Friday.
Analysts and professional investors say a long list of potential reasons is behind the bond market's sharp moves, which are seen as more rational and sober than the stock market, but at the heart of the issue is the risk that the economy will slow sharply from its current, extremely high growth rate.
Aside from the new coronavirus
variants, other risks to the economy include the US government's waning pandemic relief efforts and a Federal Reserve that appears poised to begin reducing its market-stimulating assistance later this year.
Monday's selling pressure was widespread, with nearly 90% of S&P 500 stocks falling, including Apple
, which fell 2.7% and Microsoft
, which fell 1.3%. During previous downturns, such stocks seemed nearly immune to virus fears, rising with expectations for continued growth almost regardless of the economy's strength.
Analysts predict that profit growth in the S&P 500 will be nearly 70% year on year in the second quarter, the highest since 2009, when the economy was emerging from the Great Recession.
However, as concerns grow that the economy's growth has peaked, analysts are attempting to forecast how much growth rates for corporate profits will slow in the coming quarters and years.
Yuri Kageyama of the Associated Press
contributed to this report.