(CBS New York) – The stock market can be like a roller coaster ride. Unfortunately, the journey on Monday was downhill for many investors. After surpassing 35,000 and hitting record highs last week, the Dow Jones plunged over 700 points to end the day at 33,873. The S&P 500 lost about 1.6 percent while the Nasdaq Composite fell 1.1 percent. It was the worst day of the year so far. But why was the market declining so much today?
The decrease is due to several factors. At the top of the list is the rise of the delta variant of COVID, which is more dangerous and contagious than other strains. The number of domestic vaccinations continues to rise at the rate of about 500,000 vaccinations per day. But while 48.6 percent of the U.S. population is vaccinated, the state percentages range from 66.9 percent in Vermont to 33.7 percent in Alabama. Outbreaks are increasingly occurring in areas where fewer people have been injected per capita. The number of new cases rose about 70 percent last week, with most states seeing an increase.
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The US economy is largely open, although some fear that this could change if the delta takes off. Other countries where vaccinations are harder to come by have stricter restrictions. Japan, for example, is the third largest economy in the world, but only about 20 percent of its residents are fully vaccinated. The upcoming Olympic Games will be played completely without foreign or domestic fans. Outbreaks are also becoming more common in Southeast Asia.
With such a tightly-knit international economy, a virus outbreak in one part of the world can have far-reaching effects in other places. The domestic economy cannot continue its ascent without goods from around the world and the smooth flow of supplies that goes into making those goods. Look no further than the persistent delivery delays that secured goods for months or the semiconductor problems that ravaged automobile manufacturers’ production lines. Economic slowdowns caused by COVID elsewhere will weigh on the US economy.
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Another concern is the phasing out of home pandemic relief efforts. A fourth stimulus check is unlikely. The weekly federal unemployment bonus of $ 300 is slated to end on Labor Day, even though 22 states have already discontinued it. Federal student loan payments, many of which have been in administrative debt since March 2020, will resume this fall. Also, the Federal Reserve appears poised to ease its support for the markets later this year. Some experts wonder whether the recovery can continue at its rapid pace without the help of the federal government.
The losses on the stock exchanges were felt across the board in Monday trading. However, companies that have relied on a strong rebound have suffered some of the biggest losses. United Airlines was down 6.2 percent while Carnival Cruise Line was down 5.6 percent. At the same time, US air travel remains strong and consumer spending rose 0.6 percent in June, according to the Department of Commerce.
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The Dow Jones fell over 10,000 points in the early days of the pandemic, falling from over 29,000 to just over 19,000. It lost about a third of its value in this period. The Dow has since regained all of that and more in a run that lasted nearly 16 months. Will Delta Variation Concerns and Slowing Recovery End the Run?