U.S. stock indexes fell more than 1% on Monday, dragged by concerns about the impact of tighter COVID-19 curbs on the global economy, and a potentially devastating setback to President Joe Biden’s investment bill.
Surging global infections of the Omicron coronavirus variant have sparked worries in financial markets as many European nations and Britain weigh the possibility of restrictions during Christmas.
Travel stocks fell the most, with the S&P 1500 airlines index dropping 2.0%. Royal Caribbean Group slipped 1.8% after saying 48 people on its Symphony of the Seas cruise ship tested positive for COVID-19.
“Typically what happens in Europe is a bit of a preview for what we see in the United States. So, if we see a lot more infections in the U.S., it could stress hospitals, make people less reluctant to get out, spend, and partake in the economy. That’s definitely a cause of concern,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
All of the 11 major S&P 500 sector indexes fell in early trading, with energy tumbling 3.0% as oil prices slumped by about $3.
Technology, communication services and consumer discretionary, sectors which house majority of the mega-cap growth stocks, extended their slide from the previous session.
Denting the market’s sentiment further, U.S. Senator Joe Manchin said on Sunday he would not support Biden’s $1.75 trillion domestic investment bill.
Goldman Sachs trimmed its quarterly U.S. GDP forecasts for 2022 after Manchin’s comments.
The developments come at a time when the Federal Reserve decided last week to end its pandemic-era stimulus faster, with the central bank signaling at least three quarter-percentage-point interest rate hikes by the end of 2022.
“You have to believe that if the stimulus does not go through because they can’t get Senator Manchin’s support, and Omicron wreaks some havoc with the economy, then clearly the Fed is going to have to slow down their plans to raise rates,” Zaccarelli said.
At 9:49 a.m. ET the Dow Jones Industrial Average was down 600.91 points, or 1.70%, at 34,764.53, the S&P 500 was down 68.96 points, or 1.49%, at 4,551.68 and the Nasdaq Composite was down 228.46 points, or 1.51%, at 14,941.22.
Oracle Corp slipped 3% after the enterprise software maker said it would buy electronic medical records company Cerner Corp for $28.3 billion.
Declining issues outnumbered advancers for a 8.39-to-1 ratio on the NYSE and for a 5.84-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week highs and 10 new lows, while the Nasdaq recorded four new highs and 177 new lows.