Global markets decline over virus variant

Stocks around the world tumbled Friday, with the S&P 500 logging its worst day since February, after evidence of a new coronavirus variant in South Africa prompted some countries to reinstate travel restrictions and reignited concerns about the economic toll imposed by the pandemic.

The number of mutations in this new variant has raised fears that it could be especially contagious and render current vaccines less effective. But scientists have not come to firm conclusions yet.

“Where the market is selling off so dramatically is a product of, ‘yes, this is bad news,’ but also the fact that we have had a pretty strong run with relatively low volatility for a while,” said Kiran Ganesh, a strategist at UBS Global Wealth Management.

The S&P 500 closed 2.3 percent lower, and the Nasdaq composite index dropped 2.2 percent. European stock markets fell 3 percent to 5 percent.

U.S. stock markets were closed Thursday for the Thanksgiving holiday, and they closed early Friday.

Friday’s decline pulled the benchmark S&P 500 down further from a record high reached just last week. Amid supply chain disruptions and shortages of goods and workers in some sectors, investors have been preoccupied by rising prices and expectations about central banks withdrawing stimulus to fight inflation.

But the emergence of a new variant abruptly shifted their focus back to the core woes of the pandemic. A fourth wave of the virus in Europe has already led to a tightening of restrictions, including some lockdowns.

“The pandemic and COVID variants remain one of the biggest risks to markets and are likely to continue to inject volatility,” Keith Lerner, a strategist at Truist, wrote in a note to clients.

Lerner argued that the sell-off was not overdone, considering the heights at which stocks have been trading.

“We are not making any changes to our investment guidance at this point,” he wrote.

Demand for the relative safety of government bonds jumped, pushing prices up and yields down. The yield on the 10-year U.S. Treasury plunged 15 basis points, or 0.15 percentage points, to 1.48 percent, the biggest single-day drop since March 2020. The yield on Germany’s bund, Europe’s benchmark bond, fell 9 basis points to minus 0.34 percent.

In an echo of the market fluctuations of last year, stocks that flourished under lockdowns and quarantines rose, including Zoom and Peloton. Companies vulnerable to travel restrictions, such as cruise company Carnival and airplane-maker Boeing, fell.