Wall Street’s main indexes have slumped, with the S&P 500 falling below 3000 points after a spike in new coronavirus cases in China and parts of the US dampened hopes of a swift economic recovery.
Battered shares of US airlines, casino operators and cruise operators were among the top decliners after they attempted a rebound over the past month.
Norwegian Cruise Line and Wynn Resorts fell seven per cent and 4.3 per cent on Monday.
The S&P 1500 airlines lost 4.5 per cent.
Beijing re-imposed curbs after a wholesale food market saw an unexpected spike in cases, while the US saw a record number of new infections and hospitalisations in more states, including Florida and Texas.
The CBOE volatility index, a gauge of investor anxiety, hit its highest level since April 22.
Thomas Hayes, managing member at Great Hill Capital Llc in New York, said recent large gains were also to blame for the current slump.
“People are fearful about new cases rising, but at some point when you move 45 per cent off the lows in such a short period of time, any excuse will do to have a nice consolidation of the gains,” he said.
Trillions of dollars in fiscal and monetary stimulus along with easing of restrictions had lifted the S&P 500 earlier last week as much as 47.5 per cent from the pandemic low in March and helped the tech-heavy Nasdaq confirm a bull market.
But a dismal economic outlook from the US Federal Reserve and jitters over a resurgence in coronavirus cases sent Wall Street’s main indexes for their worst week since March.
David Bahnsen, chief investment officer of The Bahnsen Group based in Newport Beach, California, said it was clear there was a long way to go before the economy recovered.
“The sell-off since last week’s high is a reminder that we are not out of the woods yet. We expect a range-bound, choppy market for some time,” he said.
The benchmark S&P 500 index was once again below its closely watched 200-day moving average, after skirting around that level late last week.
At 9.48am local time, the Dow Jones Industrial Average was down 597.85 points, or 2.33 per cent, at 25,007.69, and the S&P 500 was down 56.71 points, or 1.86 per cent, at 2,984.60. The Nasdaq Composite was down 132.25 points, or 1.38 per cent, at 9,456.56.
All major S&P sectors were lower with the economically sensitive energy, financials and materials posting the biggest percentage declines.
Beginning on Tuesday, investors will focus on Fed Chair Jerome Powell’s two-day congressional testimony on the monetary policy report.
Moderna rose 3.8 per cent after a report said Israel is in advanced talks with the drug developer to buy its coronavirus vaccine.
Declining issues outnumbered advancers for a 10.77-to-1 ratio on the NYSE and for a 5.19-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and no new low, while the Nasdaq recorded 10 new highs and nine new lows.