Markets dip as investors ditch stocks and buy bonds as virus fears resume
Stan Choe, Alex Veiga, Damian J. Troise Associated press
Concerns about a resurrected pandemic caused Wall Street shares in Sydney to fall on Monday. This is driven by fears that a faster spreading variant of the virus could hamper a strong economic recovery.
The S&P 500 fell 2% in the afternoon after setting a record just a week ago. Another sign of concern is that 10-year Treasuries yields hit their lowest levels in five months as investors rushed to invest in safer places.
As of 12:42 p.m. EST, the Dow Jones Industrial Average was averaging 33,791 points, down 896 points (2.6%). The Nasdaq Composite Index was down 1.4%.
As at the start of the February and March 2020 pandemics, the airline and other airline stocks most affected by potential COVID-19 restrictions have suffered the most losses. Mall owner Simon Property Group fell 5.4% and the cruise line carnival lost 5.2%.
The drop circled the world, with some European markets dropping around 2.5% and Asian indices dropping slightly. Meanwhile, benchmark U.S. crude oil prices fell more than 6% after OPEC and its allies agreed on Sunday, ultimately allowing oil production to rise this year.
Thanks to the COVID-19 vaccination, the growing concern about the virus may seem strange to some people around the world who are unmasked or already infected. However, the World Health Organization says cases and mortality are increasing globally after a period of decline, spurred by highly contagious delta mutants. And given how closely connected the global economy is, hitting anywhere can quickly affect others on the other side of the world.
Experts say Indonesia has become a new epicenter for the pandemic as epidemics worsen in Southeast Asia. Meanwhile, some athletes have tested positive for COVID in the Tokyo Olympic Village, and the Olympics are expected to start on Friday.
Even in the United States, where vaccination rates are generally high, residents of Los Angeles County will once again have to wear masks indoors, whether or not they have been vaccinated following an increase in cases. , hospitalizations and deaths.
Nationally, the number of COVIDs per day has increased from around 20,000 over the past two weeks to around 32,000. Vaccination campaigns have hit a wall and average daily doses have fallen to their limits. lowest level since January. Cases are on the rise in all 50 states.
Local coronavirus outbreaks are starting to affect unvaccinated communities in places like Missouri and Arkansas, where hospitals are running out of space again. Almost all hospitalized COVID patients are not vaccinated. Over 68% of the adult American population has been vaccinated at least once, and 59% have been fully vaccinated. And about 12 states have yet to immunize 40% of their population.
Financial markets have been showing signs of heightened concern for some time, but the US stock market has generally remained resilient. The S&P 500 has only fallen two weeks in the past eight weeks, falling 5% from its all-time high in October.
Some analysts pointed to the context of highs and very mild movements for several weeks while analyzing the price drop on Monday.
âIt’s a bit of a stretch, but if there’s a market at all-time highs it’s execution like we did, with virtually no pullback and very vulnerable to all kinds of bad news. “It will be,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “It was a question of what was that turning point, and we seem to have finally reached it this morning,” worried the Delta variant.
He and other analysts are bullish that stocks can rebound quickly. Investors have recently been trained to view all stock declines simply as an opportunity to buy cheap. In addition, the economy is generally expected to continue to grow.
Barry Banister, Stifel’s chief equity strategist, was more pessimistic. He says the stock market could be on the verge of falling as much as 10% after a sharp rise in prices. The S&P 500 has almost doubled since its low in March 2020.
âThe assessment was too frothy,â he said. “There was so much optimism there.”
The bond market was bigger and more durable in its warning. Yields on 10-year government bonds tend to fluctuate in response to expectations of economic growth and inflation, up from around 1.75% at the end of March. Monday went from 1.29% Friday to 1.20%.
Analysts and professional investors say the long list of reasons could be behind the upheaval in the bond market, which is seen as more rational and calm than the stock market. But at the heart is the risk that the economy will slow sharply from its current very strong growth.
In addition to newer variants of the coronavirus, other risks to the economy include the decline in the US government’s pandemic rescue efforts and the Federal Reserve, which is expected to start reducing market support later this year.
Sell ââpressure was widespread on Monday, with nearly 95% of S&P 500 stocks down. Even Big Tech stocks fell, Apple fell 2.5%, and Microsoft fell 1.5%. These stocks seemed largely immune to fear of the virus at the start of the recession and rose in the hope that they would continue to grow regardless of economic strength.
Losses occurred despite some companies reporting stronger earnings growth from April to June than analysts expected. For example, Tractor Supply said profits and revenues exceeded Wall Street expectations, but stocks fell 5.1%.
Analysts are forecasting about 70% year-over-year profit growth across the entire S&P 500 in the second quarter. This will be the strongest growth since 2009, when the economy emerged from the Great Recession.
But as concerns grow that economic growth has already peaked, analysts are trying to limit the growth slowdown over the next few quarters and years to the benefit of the company. is.
Contributed by Yuri Kageyama, an AP trade writer.
Markets dip as investors shed stocks and buy bonds as virus fears escalate again – Press Enterprise Markets dip as investors shed stocks and buy bonds as virus fears escalate again – Press Enterprise