Stock futures climbed in overnight trading on Monday after concerns about the spread of Covid-19’s delta variant sent investors dumping equities, especially those directly affected by pandemic restrictions.
Futures on the Dow Jones Industrial Average rebounded 80 points. S&P 500 futures gained 0.3% and Nasdaq 100 futures traded 0.4% higher.
Wall Street suffered a sharp sell-off during regular trading hours as investors feared that the fast-spreading delta coronavirus variant could hinder the economic recovery. The blue-chip Dow tumbled more than 700 points to post its worst day since October, while the S&P 500 fell 1.6% and the Nasdaq Composite dropped about 1.1%.
“Fear of stagflation will be a major concern for investors if a resurgence in COVID infections causes economies to slow while consumer prices continue an upward trajectory,” said Peter Essele, head of investment management at Commonwealth Financial Network.
New Covid cases are rebounding in the U.S. as the delta variant spreads, largely among the unvaccinated. The U.S. is averaging about 26,000 daily cases in the last seven days, more than double the average from a month ago, according to CDC data.
Shares that are directly tied to a successful reopening, such as airlines and cruise line operators, bore the brunt of the sell-off. Carnival and Norwegian Cruise Line dropped more than 5% each, while Royal Caribbean fell 4%. Shares of United Airlines dropped 5.5%.
Classic cyclical sectors energy and financials were the biggest losers, falling 3.6% and 2.8%, respectively. The 10-year Treasury yield tumbled as much as 12 basis points to 1.17%, its lowest level since February, intensifying fears of an economic slowdown.
Still, even after Monday’s drop, the S&P 500 is just 3.1% below its record hit last week. Additionally, while the equity benchmark dipped below its 50-day moving average during Monday’s rout, it ultimately closed above that key technical level, offering some hope to investors looking for a rebound.
“Many of the cyclical companies are selling off on fears that Covid will stop the recovery in its tracks,” said Chris Zaccarelli, CIO at Independent Advisor Alliance. “We don’t believe that that’s the case and are willing to let the sell-off run its course and buy the dip on the belief that the economy will fully recover and return to its prior growth trajectory, bringing most of the cyclical companies in the airline, travel and leisure industries along with it.”
IBM shares jumped 3% in extended trading Monday after the enterprise technology and services provider reported second-quarter results that topped expectations and showed its strongest revenue growth in three years.
