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Stock futures soared in trading overnight on Monday after concerns over the spread of the delta variant of Covid-19 prompted investors to dump stocks, especially those directly affected by the pandemic restrictions.
Futures contracts on the Dow Jones Industrial Average rebounded 80 points. S&P 500 futures gained 0.3% and Nasdaq 100 futures traded up 0.4%.
Wall Street suffered a sharp decline during normal trading hours as investors feared the rapidly spreading variant of the delta coronavirus could hamper economic recovery. The Dow blue chip fell more than 700 points to post its worst day since October, while the S&P 500 fell 1.6% and the Nasdaq Composite fell about 1.1%.
“The fear of stagflation will be a major concern for investors if a resurgence of COVID infections causes economies to slow down as consumer prices continue to rise,” said Peter Essele, chief financial officer. investments at Commonwealth Financial Network.
New cases of Covid are rebounding in the United States as the delta variant spreads, largely among the unvaccinated. The United States has averaged about 26,000 daily cases over the past seven days, more than double the average from a month ago, according to CDC data.
Equities directly linked to a successful reopening, such as airlines and cruise lines, bore the brunt of the sale. Carnival and Norwegian Cruise Line fell more than 5% each, while Royal Caribbean fell 4%. United Airlines shares fell 5.5%.
The traditional cyclical sectors of energy and financials were the biggest losers, falling 3.6% and 2.8% respectively. The 10-year Treasury yield fell 12 basis points to 1.17%, its lowest level since February, heightening fears of an economic slowdown.
Yet even after Monday’s drop, the S&P 500 is only 3.1% below its high last week. Additionally, as the equity benchmark fell below its 50-day moving average in Monday’s rout, it ultimately closed above this key technical level, offering some hope for the investors looking for a rebound.
“Many cyclical companies are selling out of fear that Covid will stop the recovery in its tracks,” said Chris Zaccarelli, CIO at Independent Advisor Alliance. “We don’t think this is the case and are prepared to let the liquidation take its course and buy the downside believing that the economy will fully recover and return to its previous growth path, causing most cyclical companies to go downhill. the airline, travel and leisure industries with it. “
IBM shares jumped 3% in extended trading on Monday after the provider of technology and enterprise services announced second quarter results above expectations and showed its strongest revenue growth in three years.
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