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Dow plunges more than 700 points on fears Delta variant could derail recovery

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Social Links for Lydia Moynihan
Published July 19, 2021
Updated July 19, 2021, 5:13 p.m. ET

The Dow plunged more than 700 points on fears the spread of the coronavirus’ Delta variant could disrupt the global economic recovery – in addition to new worries over inflation and oil prices.

The Dow Jones industrial average finished Monday’s session down 725 points, or 2.1 percent, at 33,962, making it the worst day for the blue-chip index since October. The S&P 500 and Nasdaq slumped 1.6 percent and 1.1 percent, respectively.

The sharp drops — which in the afternoon had briefly stretched to nearly 950 points for the Dow –marked a painful reversal from last week, when the Dow briefly hit a new high above 35,000.

“The fears over the Delta variant have investors concerned about reopening momentum stalling out,” managing director at TJM investments Tim Anderson told The Post. “We’ve had a strong performance in the first half of the year and some investors are looking to lock that in.”

Over the last week, new cases have climbed as the ultra-contagious Delta variant becomes the dominant strain. While cases are primarily spreading among populations with low vaccination rates, even states with a majority of residents vaccinated like California are implementing new restrictions.

People at a pub in London on Monday.
People at a pub in London on Monday, which the UK government has branded “Freedom Day” as it lifts coronavirus restrictions despite the rise of the Delta variant. Getty Images

Travel stocks are bearing the brunt of today’s losses. American Airlines, United Airlines, and Carnival all lost more than 4 percent.

Nagging concerns of skyrocketing inflation are also weighing on investors. Inflation rates are at their highest in 13 years, according to consumer price index data from June. A report released Friday from the University of Michigan shows consumers believe inflation will continue and even escalate — they estimate prices on goods will climb 4.8 percent over the next year.

Oil prices pushed energy stocks, including Marathon Oil and Occidental Petroleum, more than 4 percent lower. Over the weekend, the OPEC+ nations agreed to expand oil production, effectively diminishing the price of oil as supply increases.

“When markets are hit with concerns about inflation, coronavirus, and even an impasse on infrastructure, the market will shoot first and ask questions later,” Anderson added.

Anderson noted the Russell Index, filled with uber growth stocks, is getting hit particularly hard as uncertainty roils markets but suggested it could make for an interesting buying opportunity later this week.

People wait for admission outside the emergency ward of a hospital tending to Covid-19 coronavirus patients in Surabaya on July 11, 2021.
People wait for admission outside the emergency ward of a hospital tending to COVID-19 coronavirus patients in Surabaya on July 11, 2021, as Indonesia faces its most serious outbreak driven by the highly infectious Delta variant. AFP via Getty Images

As markets tumble, investors are pouring into 10-year Treasury notes – a move that pushed yields from 1.3 percent Friday to 1.181 percent today. A decline in yields happens when the price of a bond increases.

Still, some investors say they aren’t overly worried about the selloff. “The Federal Reserve’s policy will continue to work,” chief investment strategist at the Leuthold Group, told The Post. “We were due for a correction.”