Virus headwinds hit Wall Street after months of smooth sailing

Investors behaved as they did at the start of the pandemic on Monday, pumping money into so-called home stocks, whose business models seem almost tailor-made to thrive despite lockdowns. Peloton shares climbed more than 7 percent. Etsy’s stock, which soared last year as consumers searched for homemade face masks, jumped 3.2%.

Investors also bought shares of Clorox, the Kroger grocery chain, Campbell Soup and toilet tissue maker Kimberly-Clark. These consumer staples businesses fared extremely well during last year’s worst pandemic panic period, as consumers stockpiled essentials.

The pain was particularly pronounced in areas such as airlines, pleasure cruise lines and casual restaurant chains – all of which had started to recover this year as the pandemic was first brought under control. Norwegian Cruise Line and United Airlines each fell about 5.4%. Shares of office building owner Vornado fell almost 4.7% as investors took into account the possibility that a return to normal work patterns after the summer was threatened.

A reassuring data point came Monday from the National Bureau of Economic Research’s business cycle dating committee – which officially declares when recessions start and end. The pandemic-induced economic downturn was the shortest on record, lasting just two months and ending in April 2020, but that fact was not enough to appease anxious investors.

They invested their money in government bonds in a rush for safety, pushing bond yields – which move in the opposite direction of prices – sharply lower. The yield on the 10-year note plunged to 1.19%.

Economically sensitive stocks such as commodity producers, finance companies and industrial companies drove the market down. Tech stocks also slumped, with the tech-rich Nasdaq Composite Index falling 1.1%. The Vix, an index widely known as the Wall Street fear gauge, climbed more than 20%, its biggest jump since May.

Just a few weeks ago, the main concern for investors was inflation – the possibility that such a rapidly growing economy could trigger a wave of rampant price increases. In particular, investors feared that the surge in prices could push the Fed back from some of the easy money policies the central bank put in place during the pandemic, which have helped boost markets over the past year.