US stock markets dropped sharply on Monday as investors worried about the impact of the coronavirus Delta variant on the economic recovery.
The selloff comes as the variant continues to spread across the US and around the world. Covid cases are now rising in all 50 states and some cities are once again considering or imposing mask mandates.
The Dow Jones Industrial Average closed down 725 points, or 2.1%, after losing 946 points earlier in the day. The S&P 500 lost 1.6% and the technology-heavy Nasdaq Composite declined 1.1%.
Last week, Dr Rochelle Walensky, director of the Centers for Disease Control and Prevention, said the seven-day average of coronavirus infections had increase nearly 70% in a week, to about 26,300 cases a day.
That news came as cases are rising even in other highly vaccinated nations, including the UK, leading to worries of a broader economic slowdown. In London the FTSE 100 closed down 2.4% at 6,844 points, its biggest one-day fall since 11 May. Markets also fell in Germany and France.
Monday’s selloff was reminiscent of the market losses experienced in the early days of the pandemic, with airlines and travel companies falling hard amid fears of new travel restrictions.
American Airlines, cruise ship operator Carnival and United Airlines all fell over 4%.
“Much of it is related to the Delta,” Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told Reuters. “There’s some concern too that maybe the economy is not going to open up as quickly as everyone thinks, and the big boom that everyone’s expecting is going to be more of a pop than a boom.
“We’re woefully off of breakneck economic growth, and judging by the activity we’re seeing we’re overestimating a lot of the economic reports.”
Despite recent falls, stock markets remain close to the record highs they achieved last week. But investors have also been rattled by fears of rising inflation. Pandemic shortages have led to sharp increases in the price of goods including cars, airline tickets and apparel as the US economy has reopened.
Last week the labor department said its consumer-price index, a key measure of inflation, had increased 5.4% from a year ago, its highest 12-month rate since August 2008.
Republicans have attacked Joe Biden’s ambitious economic plans arguing they will further stoke inflation. But the president and his economic team argue the increases are a short-term phenomena driven by pandemic shortages.
“We also know that as our economy has come roaring back, we’ve seen some price increases. Some folks have raised worries that could be a sign of persistent inflation. But that’s not our view,” Biden said Monday, speaking from the White House.
“Reality is you can’t flip the global economic light back on and not expect this to happen. As demand returns, there’s going to be global supply chain challenges,” Biden said.
