Stocks were falling Thursday and Treasury bond yields tumbled to five-month lows as investors feared the the spread of new coronavirus infections could stall global growth.
The Dow Jones Industrial Average dropped 365 points, or 1.05%, to 34,315, the S&P 500 declined 1.07% and the Nasdaq fell 0.91%.
Stocks set record highs set Wednesday but fell sharply Thursday amid worries about the economic recovery. The global death from COVID-19 passed 4 million on Wednesday, according to Johns Hopkins University, as the disease’s delta variant has spread rapidly in countries with lagging vaccination rates. Sydney suffered its biggest jump in coronavirus infections this year as the delta variant spread in the Australian city.
The World Health Organization urged caution on worldwide reopenings.
The Federal Reserve’s stimulus plans, meanwhile, remained front and center for investors. Minutes from the Federal Reserve’s meeting in June showed the central bank discussed the appropriate time to begin pulling back on its support for the recovering U.S. economy.
“The Committee’s standard of ‘substantial further progress’ was generally seen as not having yet been met, though participants expected progress to continue,” according to minutes from the Federal Open Market Committee meeting on June 15-16.
Video: Cramer: Covid fears fueling market decline, and China crackdown leading to bitcoin drop (CNBC)
“Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had
anticipated at previous meetings.”
That assessment rattled investors, who already were looking at key manufacturing and services sector data that indicated labor market and raw materials shortages were hampering growth in major economies around the world.
“Although the Fed has emphasized plans to keep monetary policy loose for the foreseeable future, this policy isn’t set in stone,” said Richard Saperstein, chief investment officer of Treasury Partners. “It’s hard to understate the degree to which an easy Fed has supported asset valuations throughout markets, and the timing and method of pulling away the punch bowl could lead to market volatility.”
The benchmark 10-year Treasury fell Thursday to 1.288%, around the lowest levels since February. It had fallen to as low as 1.25% earlier in Thursday’s session.
“The sharp drop in yields reflects the market’s concern that the Fed will begin tapering soon and that the removal of liquidity from the system will create volatility and a rush out of risk assets (like equities) and toward safe havens (like government bonds),” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The number of Americans filing for first-time unemployment benefits rose slightly last week to 373,000, above forecasts but near pandemic lows.
Tesla was up modestly after debuting a pared-down version of its Model Y SUV in China amid increased competition, declining sales and a bout of negative publicity that has shifted Chinese consumer sentiment away from the California-based electric car pioneer.
This article was originally published by TheStreet.