Wall Street Close: Dow drops the most in nine months amid coronavirus, reflation woes

  • US equities witness the sea of red as risk-off intensifies.
  • US issues “Do Not Travel” advisory for the UK over covid concerns, Australia extends local lockdowns.
  • Treasury yields jump the most since November, oil prices drop the most in 15 months.

US stocks posted heavy losses by the end of Monday’s North American session as the coronavirus (COVID-19) woes joined inflation concerns and Sino-American tussles to weigh on the sentiment. A light calendar and the Fed’s blackout period ahead of the next week’s meeting also allowed the bears to dominate at the week-start.

The Delta covid variant not only pushed Australia to extend local activity restrictions but also forced the US to issue the “Level 4” travel advisory for the UK. The worsening virus strain fears challenge the economic recovery from the pandemic while the chatters over the Fed’s monetary policy adjustments, backed by rising inflation expectations, add to the market’s pessimism. Additionally, the escalation in the US-China tussles, recently over the Microsoft Exchange hacking, also magnifies the risk-off mood.

Amid these plays, Dow Jones Industrial Average (DJI) had the worst daily performance since October, down 2.09% around 33,962, by the end of Monday’s trading. S&P 500 and Nasdaq were also not spared from the bears’ grip as the former slumped 1.58% to 4,258 whereas the latter marked 1.06% daily losses to end the day around 14,275.

Market’s gauge of fear, the CBOE Volatility Index (VIX) jumped 22%, the most since early May, whereas the US 10-year Treasury yields dropped 10 basis points (bps) to mark the heaviest daily fall in eight months.

Oil prices also portrayed the risk aversion with a 7.0% daily fall, backed by OPEC+ news, whereas gold added 0.20% on the day.

Among the blue-chip stocks, Boeing dropped the most whereas Zoom Video Communications couldn’t cheer news of the Five9 acquisition, down 2.0% daily. It should, however, be noted that Virgin Galactic Holdings gained over 7.0% amid positive concerns over space travel ahead of Blue Origin flight.

It’s worth mentioning that the second-tier housing data may entertain the markets ahead of Thursday’s ECB. However, the risk-off mood could keep stocks pressured.

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