Stocks fell due to new COVID variant; Dow fell 905 points
The stock market fell on Friday, and the Dow Jones Industrial Average briefly fell by more than 1,000 points, as a new variant of the coronavirus that was first discovered in South Africa appeared to be spreading globally. Investors are not sure whether this variant is likely to reverse the progress of the COVID-19 pandemic for several months.
The Standard & Poor’s 500 Index fell 106.84 points, or 2.3%, to close at 4,594.62. This was the worst day for the Wall Street benchmark index since February.
As investors try to reposition themselves to protect themselves financially from the new variants, all factors from banks, travel companies, and energy companies have dragged down the index. The World Health Organization called the variant “highly contagious.”
Fearing that the global economy would slow down again, oil prices fell by about 13%, the biggest drop since the beginning of the pandemic. This in turn has dragged down energy stocks. Exxon Mobil shares fell 3.5% and Chevron shares fell 2.3%.
Blue chip stocks closed down 905.04 points to 34,899.34. The Nasdaq Composite Index fell 353.57 points, or 2.2%, to 15,491.66.
Oanda’s Jeffrey Halley said in a report: “Investors may shoot first and then ask questions until they know more.” The trend in the bond market proves this, the 10-year term U.S. Treasury yields fell to 1.48% from 1.64% on Wednesday. As a result, banks suffered some of the biggest losses. JPMorgan Chase fell 3%.
There are other variants of the coronavirus—the delta variant destroyed most of the United States throughout the summer—and investors, public officials, and the public are upset about any new variants that are spreading. It has been nearly two years since the emergence of COVID-19, and so far, more than 5 million people have lost their lives worldwide.
Cases of the new variant have been found in major cities in South Africa such as Hong Kong, Belgium, Tel Aviv, and Johannesburg.
The economic impact of this variant has been felt. Flights between South Africa and Europe are quarantined or completely closed. Aviation stocks were quickly sold off, United Airlines fell 9.6%, and American Airlines fell 8.8%.
Douglas Porter, chief economist at BMO Capital Markets, said: “Until recently, financial markets seem to put COVID in the rearview mirror.” “At least, (the virus) may continue to give the global economy in 2022 The gears lose sand, curb recovery (and) keep the kinks in the supply chain.”
Even Bitcoin was sold. According to CoinDesk data, the digital currency fell 8.4% to US$54,179.
One sign of Wall Street anxiety is the volatility index. The market’s volatility index is sometimes called the “fear indicator.” The VIX index rose 53.6% to 28.54, which is the highest reading since the vaccine began to be widely distributed in January.
Fearing more lockdowns and travel bans, investors moved their funds to companies that benefited mainly from previous waves, such as Zoom Communications for conferences or Peloton for home fitness equipment. The share prices of both companies have risen by nearly 6%.
Coronavirus vaccine manufacturers are one of the biggest beneficiaries of the emergence of this new variant and subsequent investor reaction. Pfizer’s stock price rose more than 6%, while Moderna’s stock price rose more than 20%.
However, Merck’s shares fell 3.8%. Although US health officials stated that Merck’s experimental treatment for COVID-19 is effective, data shows that the pill is not as effective as initially thought to keep patients away from the hospital.
Investors worry that supply chain issues that have affected global markets for months will worsen. Ports and cargo yards are very fragile and may be closed due to new local outbreaks.
Neil Schilling, a macroeconomic economist at Capital Capital in London, said: “The supply chain is already stretched. The new and more dangerous wave of the virus may cause some workers to temporarily withdraw from the labor market and prevent others from returning, thereby causing the current labor shortage to worsen. .”
This variant also puts more pressure on central banks that are already facing a dilemma: whether and when to raise interest rates in response to rising inflation. “The threat of a new and more serious variant of the virus may be a reason for the central bank to postpone interest rate hike plans until the situation becomes clearer,” Shearing said.
Stock trading on the Friday after Thanksgiving is usually the slowest day of the year, and markets close at 1pm Eastern Time. However, Friday’s trading volume was much higher than the shortened day of the holiday. The trading volume of stocks on the New York Stock Exchange is approximately 3.4 billion shares, which is only slightly lower than the average daily trading volume of 4 billion shares.