Stock prices fall as COVID-19 variants threaten economic recovery
From Wall Street to Sydney, Monday’s stocks are sinking in fear of risingThis means that pandemics are getting worse in hotspots around the world.
The S & P 500 Index fell 1.6% in the first 30 minutes of trading after hitting a record high just a week ago. Tracking the largest 500 companies in the United States, the index traded at 4.261 around noon EST.
As another sign of concern, yields on 10-year Treasuries approached their lowest levels in five months. It reached 1.21% as investors scrambled for a safer place to put their money.
The Dow fell more than 700 points (2%) at 33,908 at noon, but the tech-heavy Nasdaq Composite fell 0.8%, recovering some of its early morning decline.
Shares of airlines, hotels, and other companies most affected by potential COVID-19 restrictions, reminiscent of the early February and March 2020 pandemics, suffered the most losses. Simon Property Group lost 6.8%.
Also, fears that new virus variants are being dragged particularly hard in low-vaccination economies have caused some European markets to fall by more than 2%, circling the world. Meanwhile, benchmark US crude oil prices have fallen by more than 5% after OPEC and its allies agreed on Sunday, ultimately allowing oil production to increase this year.
Experts say Indonesia has become a new epicenter of the pandemic as outbreaks worsen across Southeast Asia. Meanwhile, some athletes have tested positive for COVID in the Olympic Village in Tokyo, and the Olympics are scheduled to begin on Friday.
Vaccination rates are high in the United States and some other developed countries, but the tightly-knit global economy means that hits everywhere can quickly affect others on the other side of the world. Means.
In Japan, the world’s third-largest economy, vaccine deployment is lagging behind other developed countries and has recently stagnated. Japan has so far been completely dependent on imported vaccines, with only one in five Japanese being fully vaccinated.
Financial markets have shown signs of heightened concern for some time, but the US stock market has generally remained resilient. The S & P 500 has been down for just two weeks in the last eight weeks.
That said, the bond market is getting more and more warning. Yields on 10-year Treasuries tend to fluctuate in response to expectations of economic growth and inflation, falling from a perch of about 1.75% in March. Monday morning was 1.22%, down from 1.29% in the second half of Friday.
Analysts and professional investors say the long list of reasons could be behind the upheaval in the bond market, which is considered more rational and calm than the stock market. But at the core is the risk that the economy could slow sharply from its current very high growth.
In addition to new variants of the coronavirus, other risks to the economy include the decline of US government pandemic bailout efforts and the Federal Reserve, which is expected to begin reducing support for the market later this year.
Concerns about the possibility of a sharp slowdown have particularly hurt stocks whose profits are most closely linked to economic strength. For example, SME stocks have plummeted since peaking in March.
The small-cap Russell 2000 Index fell 2.3% on Monday, outpacing the losses of its big rivals on Wall Street.
In Asia, Japan’s Nikkei 225 fell 1.3%, Hong Kong’s Hang Seng Index fell 1.8%, and South Korea’s Kospi fell 1%. Australian stocks fell 0.9%.
In Japan, vaccine deployment is lagging behind other developed countries and has recently stagnated. Japan has so far been completely dependent on imported vaccines, with only one in five Japanese being fully vaccinated.
Japan’s benchmark Nikkei 225 fell 1.3% to close at 27,652.74. South Korea’s Kospi fell 1.0% and Hong Kong’s Hang Seng fell 1.8%.
Investor attention is now focused on the profits of US companies. Most companies report results this week and the following week. Expectations are high, with S & P 500 profits expected to grow 64% year-on-year, according to FactSet.