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Dow, S&P 500 sinks 2% as virus wave stifles recovery hopes

  • Spike in virus cases hits travel and inventory linked to recovery
  • Five9 jumps on Zoom’s $ 14.7 billion buyout deal
  • The indices slide: Dow 2.61%, S&P 2.04%, Nasdaq 1.40%

July 19 (Reuters) – The Dow and S&P 500 indices fell more than 2% on Monday as investors sold economically sensitive stocks and travel stocks and sought the perceived safety of bonds over fears that a spike in COVID-19 cases won’t derail a broader economic recovery.

New infections have increased in parts of Asia and England, while COVID-19 cases in the United States soared 70% last week, fueled by the Delta variant. Read more

All 11 S&P sectors fell, with so-called value stocks, including financials (.SPSY), industrials (.SPLRCI), materials (.SPLRCM) and energy (.SPNY), falling by 2.5% and 4.4%.

The banking sub-index (.SPXBK) fell 3.4%, following a decline in the benchmark 10-year Treasury yield to its low in mid-February.

“Investors are concerned that the Delta variant will reset the clock in terms of the progress we’ve made with COVID-19 and the economy recovering,” said Andre Bakhos, managing director of New Vines Capital LLC in New Jersey .

On Friday, the benchmark S&P 500 (.SPX) ended a three-week winning streak with only defensive sectors, seen as relatively safe in times of economic uncertainty, posting small gains.

On Monday, the highly technical Nasdaq Index (.IXIC) outperformed the broader market as investors again flocked to growth-linked stocks that led Wall Street to recover from its coronavirus lows on Monday. last year.

“It’s a way for investors to hedge the risk of COVID-19,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in Newport Beach, California.

“We know that tech stocks will tend to do better when there is less stability, because they are less responsive to consumers who increase their spending on services and exit.”

Yet at 1:40 p.m. ET, the Nasdaq Composite (.IXIC) lost 1.40%, to 14,224.71.

For comparison, the Dow Jones Industrial Average (.DJI) fell 904.77 points, or 2.61%, and was on track for its worst session since October 2020, while the S&P 500 (.SPX ) slipped 2.04% and was set for its largest. -day as a percentage drop since May.

Small caps sensitive to the economy (.RUT) and transport (.DJT) fell by 1.6% and 1.8% respectively.

The CBOE Volatility Index (.VIX), dubbed the Wall Street fear gauge, hit a two-month high.

Shares of travel-related companies, which had just started to climb after suffering heavy losses in closures due to the pandemic last year, fell again on Monday. The S&P 500 Airlines sub-index (.SPLRCAIR) fell almost 4%.

Cruise lines Royal Caribbean Group (RCL.N), Carnival Corp (CCL.N) and Norwegian Cruise Line (NCLH.N) fell between 4.6% and 5.9%.

After strong quarterly reports from the big banks last week, the focus is now on technology earnings with companies such as IBM (IBM.N), Netflix (NFLX.O), Texas Instruments (TXN.O) and Intel (INTC.O) which is expected to release a report this week.

U.S.-listed shares of Alibaba Holding, Baidu, and ridesharing app Didi Global (DIDI.N) fell between 2% and 7.1% on renewed fears of anti-monopoly action against big tech companies.

Zoom Video Communications Inc (ZM.O) fell 4.2% after the teleconferencing service provider announced a $ 14.7 billion stock deal to buy the call center operator based on the cloud Five9 Inc (FIVN.O). Read more

Five9 shares jumped 4.6%.

Falling issues outnumbered advances by a 6.6-to-1 ratio on the NYSE and a 3-to-1 ratio on the Nasdaq.

The S&P 500 posted 12 new 52-week highs and no new lows while the Nasdaq recorded 39 new highs and 246 new lows.

Report by Devik Jain in Bangalore; Editing by Sagarika Jaisinghani, Shounak Dasgupta and Anil D’Silva

Our standards: Thomson Reuters Trust Principles.

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