By KEN SWEET & PAUL WIEEMAN
NEW YORK (AP) – Stocks fell sharply on Wall Street on Friday after a variant of the coronavirus from South Africa appears to spread globally and the European Union has proposed suspending flights from southern Africa. The Dow Jones Industrial Average lost 905 points. The S&P 500 fell 2.3%, the worst day since September, and the Nasdaq also suffered its worst fall in two months. Travel and energy stocks lost the most, with Royal Caribbean, Carnival and Norwegian Cruises falling more than 10%. The New York Stock Exchange closes early at 1:00 pm ET.
THIS IS A MAJOR UPDATE. The earlier history of AP is presented below.
Stocks fell sharply on Friday, with the Dow Jones Industrial Average falling briefly more than 1,000 points as a new variant of the coronavirus, first discovered in South Africa, appears to spread globally. This added uncertainty to investors that months of progress in the fight against the COVID-19 pandemic could be reversed.
The S&P 500 fell 2.3%, its worst day since February. Shares in airlines and other travel companies fell as health officials in Europe and the UK quickly proposed suspending air travel from southern Africa. The price of oil fell more than 13% amid fears of another slowdown in global economic growth.
By midday, blue chips had dropped 950 points to 34,857 points. The Nasdaq Composite fell 2%.
“Investors are likely to shoot first and then ask questions until more is known,” Oanda’s Jeffrey Halley said in his report. This is evidenced by the activity in the bond market, where the yield on 10-year Treasuries fell to 1.51% from 1.64% on Wednesday. As a result, banks have suffered some of the biggest losses. JPMorgan Chase shares fell 4%.
There have been other variants of the coronavirus – the delta variant devastated much of the US over the summer – and investors, government officials and the general public are alarmed by any new spread. It has been nearly two years since the emergence of COVID-19, which has killed more than 5 million people worldwide to date.
Health officials in Europe and the UK quickly proposed a suspension of flights from southern Africa. Meanwhile, cases of this variant have been found in Hong Kong, Belgium and Tel Aviv, as well as in major cities in South Africa such as Johannesburg.
The economic implications of this option are already being felt. Flights between South Africa and Europe have been quarantined or completely closed. The airlines’ shares sold out quickly, with shares of Delta Air Lines, United Airlines and American Airlines falling more than 10% each.
An indication of how intimidating Wall Street has become is the VIX, a market indicator of volatility sometimes referred to as a market “fear indicator”. The VIX jumped 49% to 27.75, the highest since January before vaccines began to be widely distributed.
Fearing new locks and travel bans, investors have been transferring money to companies that have largely benefited from previous waves, such as Zoom Communications for meetings or Peloton for home exercise machines. Peloton was up 4% and Zoom was up about 9%.
Coronavirus vaccine stocks were also among the most profitable. Pfizer shares are up nearly 5% and Moderna shares are up 23%.
However, Merck shares fell 4%. While U.S. health officials said Merck’s experimental treatment for COVID-19 was effective, the data showed the pills weren’t as effective at keeping patients out of the hospital as the data originally suggested.
Investors are concerned that supply chain problems that have plagued global markets for months will worsen. Ports and cargo stations are vulnerable and could be closed by new localized outbreaks.
“The supply chains are already stretched,” said Neil Shearing, an economist at Capital Economics in London. “A new, more dangerous viral wave could force some workers to temporarily leave the workforce and deter others from returning, exacerbating the current labor shortage.”
This option also puts more pressure on central banks, which are already facing a difficult dilemma over whether and when to raise interest rates to combat rising inflation. “The threat of a new, more serious variant of the virus could be a reason for central banks to postpone plans to raise interest rates until the picture is cleared up,” said Schering.
Trading in stocks on the Friday after Thanksgiving is generally the slowest day of the year, with the market closing at 1:00 pm ET. Easy trading can exacerbate any losses on Friday with fewer buyers and sellers.
This was reported by Wiseman from Washington.