Delta Variant Catches Up with the Stock Market
Market indexes had threatened a sell-off Monday morning, but fought it off to post new record closing highs on both the Dow and S&P 500. The Nasdaq and Russell 2000 fell, but it was an easily digestible mixed days in the markets. Today, on the other hand, worries about growth and demand, at least partially caused by the Delta variant of Covid-19 manifesting in pockets of America.
All four major indexes were down on the day: the Dow -0.79%, or 282 points (-505 points at its intraday low), the S&P posted its worst day all month, -0.70%, the Nasdaq closed its second down day in a row, -0.93%, and the small-cap Russell was -1.19% on the day — now trailing the other indexes on the year and riding a four-day losing streak in the market. The Dow and S&P just ended five-day winning streaks.
Unlike some trading days, when sell-offs don’t have any distinct trigger and may just be profit-booking en masse, today’s environment has plenty of concerns: the Chinese Covid outbreak shutdown curbing demand (Chinese tech stocks performed worst on the Nasdaq 100 today), Retail Sales falling more than a full percentage point month over month and lax homebuilding and consumer confidence. At near all-time highs, the good news is priced in. Is the Delta variant?
It’s not all bad news today, of course. July’s Industrial Production headline nearly doubled expectations to +0.9%, more than 4x better than the downwardly-revised +0.2% reported for June. Capacity Utilization, also for July, outpaced estimates to 76.1% — the highest print since pre-pandemic levels, and half a percentage point improved from June’s 75.4%. While demand may be a question at present, supply looks to be catching up. This is a good thing.
Pharma and biopharma performed well on the day, with Vertex VRTX rebounding from Monday’s fall, +4% on the day. Pfizer PFE gained on news that a booster shot may be in vaccinated people’s future, +3%, while Gilead GILD and Biogen BIIB, despite Warren Buffett’s cashing in of BIIB shares recently, were both up 2% Tuesday. Meanwhile, Amazon AMZN shed 1.7% on the day; it’s not down year to date and 15% off its 52-week high.
Housing Starts and Building Permits are on the itinerary for Wednesday morning. This early engine of economic growth just as Covid vaccines were starting to make their way through willing Americans has hit price levels lately that have made interested parties balk at the high price tags. And again, with the Delta variant making its economic presence felt where it is most rampant, this may have an effect on homebuilding and home purchasing business in the South.
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