Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Slide in coronavirus-sensitive stocks suggests growing worries over Delta variant

Published 07/08/2021, 03:28 PM
Updated 07/09/2021, 01:06 AM
© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2021.  REUTERS/Brendan McDermid

© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2021. REUTERS/Brendan McDermid

By Lewis Krauskopf

NEW YORK (Reuters) -Diverse reasons are driving the rotation in stocks and a slide in bond yields, but weakness in travel, leisure and other COVID-19-sensitive stocks suggest that fears of the Delta variant are doing their part.

Declines in the shares of companies tied to the reopening trade have broadly outpaced those of other so-called value stocks, which have been battered on worries that economic growth will be slower than expected in coming months.

Shares of cruise stocks Carnival (NYSE:CUK) Cruise Lines and Norwegian Cruise Line (NYSE:NCLH) Holdings have slumped 10% and 9%, respectively, in July, while American Airlines (NASDAQ:AAL) Group dropped 4% and United Airlines Holdings (NASDAQ:UAL) was off 5%. MGM Resorts (NYSE:MGM) International has fallen 5.5%, while Expedia (NASDAQ:EXPE) Group has dropped 1.3%.

The Russell 1000 value index, which includes economically sensitive stocks, has fallen by 0.9% in the same time frame, while the S&P 500 has risen 0.5% in July.

“There is a lot of uncertainty and I think the market is trying to add up how much risk this poses to global supply chains and activity down the road,” said Steve Englander, head of North America macro strategy at Standard Chartered (OTC:SCBFF).

Since July 1, a basket of coronavirus-sensitive stocks tracked by Standard Chartered is down 7.3%, and off 9.4% relative to a group of tech and other stocks that outperformed during the pandemic last year.

The yield on the benchmark 10-year Treasury note has dropped about 20 basis points to 1.29% this month and was falling for an eighth straight session, marking the longest streak since a nine-session drop that ended on March 3, 2020, as the COVID-19 pandemic in the United States was gaining speed. [nL2N2OK2A4]

The availability of vaccines - including their apparent ability to keep even those infected from developing serious complications - suggests that the extent of the shutdown measures last year to control the virus will not be required.

© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2021.  REUTERS/Brendan McDermid

Still, some regions, including those without as much access to vaccines, are grappling with rising cases or putting restrictions in place. Cases are rising in places such as Spain and England, although the British government plans to reopen the economy later this month.

In Australia, Sydney has had a strict stay-at-home order in force since late last month, while Japan on Thursday declared a state of emergency in Tokyo, putting restrictions in place through Aug. 22. The pullback in coronavirus-sensitive stocks likely stems in part from concerns the variant spread could restrict travel and slow growth, said Walter Todd, chief investment officer at Greenwood Capital in South Carolina. But those stocks may have been due for a decline after such a sharp run, he said. "A lot of these stocks moved quite significantly off the vaccine news," Todd said. "Part of this is concern about the re-emergence of this variant, but also just the fact ... you are giving some back."

Latest comments

Remember when they ended lockdowns in Texas and Florida and ended mask mandates and Biden called it "neanderthal thinking" and places like California and New York remained closed with mask mandates and then Texas and Florida did so much worse than California and New York? Oh right, that never happened, Texas and Florida did just fine and California and New York have actually done worse. Not to mention crime is up massively - including massive spike in homicides - in blue states too.
alright let's believe that but we all know what is going on
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.