Stocks fall amid virus variant jitters
Stocks slumped around the world as investors rushed into haven assets after the Delta coronavirus variant cast a pall over the economic recovery, while tension between the U.S. and China escalated.
In a reversal of the reopening trade that has powered this year's equity rally, cyclical companies bore the brunt of the rout on Monday. Commodity, financial and industrial shares led losses in the S&P 500, which fell the most in two months.
The Dow Jones Industrial Average had its biggest decline since October, while small caps extended a slide from March's peak to nearly 10 per cent. After recently plunging to pre-pandemic levels, the Cboe Volatility Index, or VIX, soared.
With the risk-off sentiment spreading across global markets, long-term Treasury rates spiralled to their lowest since February — dragging the yield curve flatter. Ten-year yields tumbled as much as 12 basis points to as little as 1.17 per cent. The U.S. dollar rose alongside the yen and the Swiss franc. Despite the classic safety trade, gold retreated. Oil sank after OPEC+ agreed to boost supply into 2022. Meantime, Bitcoin's slide pushed the world's largest digital currency closer to US$30,000.
The resurgence of COVID-19 is unsettling global investors, who are considering whether new lockdown restrictions will sap the economic rebound and reverse an equity rally that had driven stocks to a record. Matt Miskin, co-chief investment strategist at John Hancock Investment Management, told Bloomberg Television that the move to “higher-quality assets” such as Treasuries is justified.
Geopolitical jitters also resurfaced on Monday after the U.S., the U.K. and their allies said Beijing has been the mastermind behind malicious ransomware, data theft and cyber-espionage attacks against public and private entities — including the sprawling Microsoft Exchange hack earlier this year.
In Toronto, concerns around rising COVID-19 cases and dropping oil prices led Canada's main stock index to dip to its lowest level since May. The S&P/TSX composite index was down 259.09 points at 19,726.45. In New York, the Dow Jones industrial average was down 725.81 points at 33,962.04.
The S&P 500 index was down 68.67 points at 4,258.49, while the Nasdaq composite was down 152.26 points at 14,274.98.
Craig Fehr, an investment strategist with Edward Jones, said rising Delta cases are sparking concerns that a budding recovery may not be as smooth as once expected.