Stocks Tumble as Growth Concerns Grip Wall Street

The drop signaled a sudden shift in sentiment in the stock market; investors in the bond market have been signaling their concerns about the economy for days.

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Stocks fall as bond yields continue to drop, reflecting worries about growth.

July 8, 2021, 9:12 a.m. ET

Data delayed at least 15 minutes

Source: FactSet

By: Ella Koeze

Stocks fell on Thursday and bond yields dropped as anxiety over the bumpy economic recovery roiled financial markets.

The S&P 500 slid as much 1.6 percent before recovering some ground. By midday, the index was down about 0.7 percent, a more modest drop but one that stood out in comparison to the relatively calm tone in financial markets in recent weeks.

Before Thursday, stocks had fallen only twice in the 13 previous trading days, with the S&P 500 in record territory. Even a modest 0.8 percent decline would be Wall Street’s worst day since mid-June.

But investors in the bond market have been signaling their concerns about the economy for days. Yields on 10-year Treasury notes, a benchmark for borrowing costs across the economy and a measure of the outlook for growth, have fallen sharply since late June.

Yields fall when traders buy bonds, something they do when they’re worried about the economy or other factors that could threaten riskier investments. On Thursday, the yield fell further, dropping as low as 1.28 percent.

“There’s growing concern on how robust the economic recovery will be,” said Edward Moya, a senior market analyst at Oanda, a foreign currency exchange. “The virus spread in other countries is starting to suggest we won’t have a strong second half of the year.”

It wasn’t long ago that investors were instead worried about the prospect that the economy would overheat as nations emerged from the pandemic-driven lockdowns. Key measures of inflation have become important data points for financial markets, because persistent price increases could prompt the Federal Reserve to start to back away from policies that support the economy.

But the rise of the highly contagious Delta variant of the coronavirus has served as a reminder that the pandemic remains a threat to both public health and the economy. Though infections and deaths in the United States are near their lowest levels since testing became widely available, on Wednesday, the Centers for Disease Control and Prevention estimated that the Delta variant now accounted for more than half of new infections in the United States.

Olympic organizers barred spectators from most events after the declaration of a new state of emergency in Tokyo, a stark reminder how quickly the pandemic can derail plans.

Shares of companies that are geared toward the economy — banks, mining companies and transportation stocks — were all lower. JPMorgan Chase dropped more than 1 percent, while the mining company Freeport McMoran fell about 3.5 percent and the railroad operator CSX fell more than 5 percent.

Concerns about the pandemic were also evident in the volatile trading in travel and tourism companies, which were volatile on Thursday. After falling more than 3 percent in early trading, Carnival Corporation was only slightly lower by late morning, while American Airlines and Norwegian Cruise Line were slightly higher.European stocks were lower. The Stoxx Europe 600 fell 1.7 percent.

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