US Stocks Retreat from Records as Covid Worries Grip Markets

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Key Takeaways

• Major stock averages decline on increased Delta virus anxiety, job shortages
• US futures hover in the green as investors remain cautiously optimistic

Stocks on Wall Street closed Thursday’s session sharply in the red while Treasury yields extended their decline. Renewed fears that the Delta variant would stall the economic recovery have taken investors’ foot off the gas pedal. In addition, the mix between high growth and high inflation is increasing concerns that the overheating economy will dent the lofty valuations of stocks.

Major stock averages in the US declined as the broad-based selloff took hold as soon as the markets opened for trading. The S&P500 and the Nasdaq Composite retreated from record highs reached the previous day and all three benchmark indexes marked a sharp reversal from their recent rallies.

The S&P500 slid the most and ended the session lower by 37.31 points, or 0.86%. The broad-market index closed at 4,320.82. The Dow Jones Industrial Average lost 259.86 points, or 0.75%, to a close of 34,421.93. The blue-chip index turned negative for the week. The tech-centered Nasdaq Composite dropped 105.28 points, or 0.72%, to finish the session at 14,559.78.

Equities, however, suffered a steeper decline through the session. The 30-stock blue-chip index lost as much as 530 points before paring some of the losses. The Nasdaq Composite dived 2% in the first half-hour of Thursday’s action.

The sharp selloff across all sectors came as market participants grew increasingly concerned about the rapidly spreading Delta variant, threatening to offset the economic expansion. Delta strain worries were accompanied by labor shortages. Employers in the US are heading to a summer marked by record levels of job openings.

A Record Number of Job Openings in the US

The Labor Department this week revealed there are more than 9.2 million job openings, a figure unseen since 2000. The level of available jobs almost matched the 9.3 million unemployed people who were actively seeking employment in May. More on the economic front, the number of people filing for jobless benefits rose by 2,000 to 373,000 last week. The continued unemployment payments marked a sharp fall as nearly half of the states have said they will cut off extended unemployment benefits by early September. Unemployment payments fell by 145,000 in the week ended June 26, the lowest level since March 2020.

Jitters in the market intensified on Thursday as Delta virus cases continued to pick up. Daily hospitalizations rose 6.8% after a long period of calmness. Areas with low vaccination rates, which are particularly vulnerable to the more contagious Delta strain, pushed up new daily cases to a seven-day daily average of 13,859, an 11% increase over the previous seven-day period.

US stock futures on Friday are hovering moderately in positive territory ahead of the opening bell today.

In overseas stock action, the Stoxx Europe 600 sank 1.72% amid a broad-market selloff. The European Central Bank said it would aim for a slightly higher inflation rate. The new inflation target of 2%, instead of the current one of just below 2%, would allow room to maintain the interest rate at ultra-low levels.

Cryptocurrencies were dragged lower on Thursday with bitcoin dropping about 5%. The digital currency is still hovering in its consolidation zone above $33,000 to $36,000 per token.