Stock Market Starts Paring Back Massive Losses As ‘Covid Anxiety’ Climbs

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Topline

Major stock market indexes recovered a fraction of their Monday losses in early Tuesday trading as the tenor of Covid-19 news continued to fuel investor concerns that the rapidly spreading Delta variant of the virus could hurt economic activity, all while the start of second-quarter earnings season sheds light on the supply shortages starting to cripple certain industries.

Key Facts

After falling 2.1% and 1.6%, respectively, the Dow Jones Industrial Average and S&P 500 climbed 417 points and 35 points, or roughly 1% each, shortly after the market opened.

The tech-heavy Nasdaq added back about 0.5% after falling 1.1% Monday—boosted once again by healthcare stocks, including top-performers Neurobo Pharmaceuticals, Immunome and Mediwound, which climbed 45%, 30% and 15%, respectively.

Travel and leisure stocks, which led the market’s Monday decline, posted only small gains, with Carnival Corp, American Airlines and Norwegian Cruise Lines climbing about 1% each after falling as much as 5%.

Meanwhile, a trio of big industrial companies—appliance-maker Electrolux, paint-supplier PPG and auto-manufacturer Volvo—fell as much as 7% following worse-than-expected earnings as a result of intensifying supply chain issues.

Electrolux CEO Jonas Samuelson says the company expects “significant regional” disparities for the rest of the year and warned that industry-wide “supply challenges” should remain “for an extended period of time.” 

In another sign of intensifying market pessimism, the cryptocurrency market lost about $100 billion in overnight trading, pushing the price of bitcoin down 6% to less than $30,000 by Tuesday morning.

Key Background

Stocks posted one of their worst days this year on Monday after a slew of weekend developments put investors on edge about the pandemic’s resurgence. Rochelle Walensky, the director of the Centers for Disease Control and Prevention, said Friday some municipalities should consider imposing mask mandates and warned the rapidly spreading Delta variant is causing a “pandemic of the unvaccinated.” Meanwhile, cities like Las Vegas and Los Angeles have already started tightening their Covid-19 guidelines, fueling concerns that state and local governments may once again impose partial lockdowns. “Investors are facing the very real prospect that limitations on daily life could be a factor affecting markets and [corporations] even into 2022, which is a far cry from the hopes many had at the start of this year when the vaccine rollout began,” a team of Deutsche Bank strategists led by Jim Reid wrote in a Tuesday note. 

Crucial Quote 

“Stocks are rebounding after the Monday slump albeit in a very tentative fashion—as Covid anxiety continues to climb although [overnight] developments weren’t all bad,” Vital Knowledge Media Founder Adam Crisafulli said Monday morning, noting the U.S.’s warning against travel to the U.K. and Indonesia and Canada’s plans to lift travel restrictions on vaccinated Americans as examples of both good and bad news. “For now, there hasn’t been a noticeable impact to economic activity as a result of the COVID resurgence, but this is by far the biggest risk facing stocks.”

Big Number

140 million. That’s about how many Americans, roughly 44% of the nation’s population, have yet to receive a single Covid-19 vaccine dose. On Sunday, Dr. Scott Gottlieb, a former head of the Food and Drug Authority, warned the Delta variant will “likely” infect a majority of unvaccinated Americans.

Further Reading

Stock Market Sell-Off: Dow Plunges 700 Points In Worst Drop Since October As Delta Variant Fears Mount (Forbes)

Former FDA Head Says Delta Will Infect ‘Majority’ Of Unvaccinated Americans—And May Be ‘Most Serious Virus’ In Their Lifetime (Forbes)

Bitcoin Plummets Below $30,000 As Crypto Market Crashes Amid Delta Variant Spread (Forbes)