Stocks plunge as COVID cases rise and crude oil prices drop

Canadian and U.S markets experienced a broad-based decline Monday as concerns around rising COVID-19 cases and dropping oil prices led Canada’s main stock index to dip to its lowest level since May.

Craig Fehr, an investment strategist with Edward Jones, said rising case counts for the Delta variant of the coronavirus are sparking concerns that a budding economic recovery might not be as smooth as once expected.

“It’s a tough start to the week,” he said, saying the effect of COVID-19 both in North America and the world has once again created concerns in markets.

“[The Delta variant] is the key driver in the weakness in the markets and it’s being exacerbated by the strike we’re seeing in equities,where we’re getting down days that are feeding on themselves.”

The S&P/TSX composite index was down 259.09 points at 19726.45.

In New York, the Dow Jones industrial average was down 725.81 points at 33962.04. The S&P 500 index was down 68.67 points at 4258.49, while the Nasdaq composite was down 152.26 points at 14274.98.

Fehr said the energy-heavy TSX was further hit by steep declines in oil prices, which were a result of a recent deal to increase production by the OPEC-plus group to increase productions.

He said demand for the commodity also faces some uncertainty, as an increase in COVID-19 cases could lead to lower sales of gasoline.

The September crude oil contract was down $5.21 US at $66.35 US per barrel, and the August natural gas contract was up 10.5 cents at $3.79 US per mmBTU.

The Canadian dollar also took a hit, trading at 78.38 cents US compared with 79.41 cents US on Friday.

Fehr said the decline in the loonie was directly tied to the drop in oil prices, but also stemmed from a “sizeable” drop in bond yields.

Despite Monday being a rocky day for North American markets, Fehr said the long-term outlook for this year and 2022 looks good.

However, he said, people should be aware that there will be more fluctuations in the market as we move forward.

Fehr added that today’s market reaction to rising COVID-19 counts shows there could be a shift in the attitude from the U.S. Federal Reserve about monetary policy.

“This is a bit of a reminder that the pandemic is over, but I don’t think this alters the longer-term story just given the economy is on sound footing.”

In other commodities, the August gold contract was down $5.80 US at $1,809.20 US an ounce, and the September copper contract was down 12 cents at $4.20 US a pound.