Stocks in the US rose 100% Monday to record levels, surpassing the lows at the beginning of the pandemic. Then Tuesday came.
A widely anticipated retail sales report showed the Delta variant is putting a damper on American consumer spending. After shares fell in premarket trading, this sent stocks even further into the red.
The S&P 500 (SPX), the broadest gauge of Wall Street, fell 0.8% in early trading. The Dow fell 360 points or 1%. The Nasdaq also fell 1%.
The market has made significant progress since the panic selloff that occurred at the beginning of America’s great lockdown. E-commerce giants such as Amazon (AMZN) and new necessities such Zoom (ZM) benefited from staying at home. Stocks rebounded rather quickly, driven by hopes for vaccine and the eventual reopening of the economy, as well as stimulus from the government and the Federal Reserve.
The S&P 500 had more than doubled by Monday’s close compared to its March 2020 pandemic low.
Although some analysts warn that the market may be getting ahead of its self, vaccines are available, recovery is on track, and the Fed hasn’t shut off the cheap money taps just yet.
The market is looking different after more than a year since the depth of the pandemic. However, there are still concerns about stocks’ future success.
Infection rates are rising, especially among unvaccinated populations, due to the Delta variant of Covid-19. As we enter the winter months, this could have a negative impact on the economy. Various companies, including airlines and other travel-related firms, have already said that Delta is hurting their business.
Economists don’t believe that another lockdown will be imminent and they think smaller-scale restrictions are more likely. Various states have recovered their mask mandates to keep its residents safe against the more infectious variant.
Consumer sentiment has suffered.
Preliminary data for August revealed that sentiment dropped to its lowest level since December 2011 – according to preliminary data. Americans also shopped less than expected in July, data showed early Tuesday, and retail sales declined for the second time in three months.
Investors have also fretted about rising inflation. Even though economists predicted that inflation would be high as America emerges from the pandemic, the spikes in monthly data stirred worries that the Fed would have to change its policies sooner than hoped. Investors anticipate that the central bank will soon announce its intention to reduce monthly asset purchases.