This is the worst day for the Dow since the fall of 943 points at the end of October. But the stock market barometer has had several even bigger crashes since the start of 2020 due to concerns about the covid-19 pandemic.
The Dow plunged more than 1,000 points last year, with five of those market crashes taking place in March, at the start of the pandemic in the United States. The Dow suffered the largest point drop in its history on March 16, 2020, with a decrease of almost 3,000 points, which represented a free fall of 13%.
Investors fear that the variant delta coronavirus could threaten the US economic recovery. The shares of companies in the sectors that were believed to benefit the most from the reopening of the economy are being the most affected.
American, United and Delta airlines fell more than 4% to 5%. Cruise operators Carnival, Royal Caribbean and Norwegian fell about 4% to 6% each.
Energy values also slumped after a more than 3% drop in oil prices. Chevron and Exxon Mobil fell 8%. The group of OPEC + countries also reached an agreement over the weekend to produce more oil, a measure that could increase supply and reduce oil prices.
Long-term bond rates also continued to decline, a sign that bond investors are now far more concerned about a delta-induced economic slowdown than they are about rising inflation fears.
The performance of the 10-year US Treasury bond it sank below 1.2% for the first time since February.
But, as consumer prices continue to climb, some worry about a more insidious threat: the possibility that another COVID-19 outbreak could slow the economy even as inflationary pressures mount. This is a phenomenon known as stagflation.
“Fear of stagflation will be a major concern for investors if a resurgence in covid infections causes the economy to slow down as consumer prices follow an upward trajectory,” said Peter Essele, chief managing officer of Commonwealth Financial Network investments, in an email.
Small American businesses were also hit hard. The Russell 2000 was down 1.3%. This index contains mainly stocks of small-cap companies that generate a higher proportion of their income in the United States than in international markets.
The still high number of unvaccinated Americans implies that vaccination rates have not reached the threshold necessary to stop the spread of covid-19.
Most Americans who have not been previously infected or have not received vaccines they will probably contract the delta variant that is spreading rapidly, said Dr. Scott Gottlieb, commissioner of the US Food and Drug Administration (FDA) during the Trump administration, on Sunday’s “Face the Nation.” the CBS network.
In forty-eight states the number of new cases has increased by at least 10% compared to the previous week, according to data from Johns Hopkins University.
The shares fell on Friday also due to conflicting reports on the health of the American consumer. Retail sales grew surprisingly in June, but a measure of consumer sentiment in July showed that Americans have less and less confidence in the economy.
The CNN Business Fear and Greed Index, which analyzes seven measures of market sentiment, is now showing signs of extreme fear.
Stocks are still up a lot this year from 2020 lows
But cloud-based call center software company Five9 escaped the market sell-off on Monday. Shares rose 4% on news that video conferencing giant Zoom was acquired for almost US $ 15,000 million. Zoom’s stock fell.
The manufacturer of vaccines against covid-19, Moderna, which will join the S&P 500 later this week, it was also up 5%. BioNTech, which makes a Covid-19 vaccine with Pfizer, also rose. However, Pfizer and Johnson & Johnson, maker of a third COVID-19 vaccine, fell slightly.
Despite recent volatility, stocks are not far from all-time highs and are having a strong year.
The Dow remains more than 10% higher in 2021 and is just 3% below its all-time high. The S&P 500 is up 13% this year and is also 3% from its all-time high.
What’s more, the S&P 500 is up nearly 90% from its March 2020 COVID-induced bear market lows. Some strategists believe the recent selloff represents an opportunity.
“We do not expect total lockdowns to occur again in the United States, so while the damage from the delta variant may be significant, we are still in the ‘buy the dip’ arena,” said Bryce Doty, senior portfolio manager at Sit Fixed Income Associates, in a report Monday.
– Anneken Tappe and Matt Egan contributed to this report.