U.S. Stocks Plunge, Dollar Index Rises as Delta Variant Spreads
Stocks plunged midday Tuesday as a sharper-than-anticipated slump in retail sales growth in July outweighed faster-than-expected growth in industrial production in the month, fueling concern the more contagious delta variant of COVID-19 is restricting activity.
The Dow Jones Industrial Average fell by 1.3% to 35,150.22, with the S&P 500 lower by 1.3% and Nasdaq down by 1.5%. Consumer discretionary, materials and industrials were among the steepest decliners while healthcare was the sole gainer.
The 10-year US Treasury yield slipped by 1 basis point to almost 1.25%, changing course from little changed earlier in the session.
The more contagious delta variant of the coronavirus has driven a faster pace of infections in the US recently, with the seven-day moving average of cases reaching 60,000 by late July compared with around 12,000 in late June, according to the Centers for Disease Control and Prevention.
Retail sales dropped 1.1% in July, more than the 0.3% decline expected in a survey compiled by Bloomberg, and a two-month low as some consumers pulled back spending because of growing concerns related to the delta variant and as government stimulus fades, according to a Stifel report. June sales, however, were revised up a tenth of a percentage point to a 0.7% gain.
Car sales dropped 3.9% in July, the third consecutive month of decline. Excluding autos, retail sales fell 0.4% in July.
“Even after accounting for the upward revisions to June data, this creates very weak momentum at the start of Q3,” Jefferies economists Aneta Markowska and Thomas Simons said in a note.
Industrial production rose 0.9% in July, above the 0.5% increase seen in a survey compiled by Bloomberg, and the largest jump in four months. Capacity utilization rose to 76.1% from 75.4% in July, also more than 75.7% anticipated in a survey compiled by Bloomberg, and the highest level since March 2020.
West Texas Intermediate crude futures declined by 1.2% to $67.02 per barrel, reversing gains of 0.2% earlier in the session.
The dollar index climbed by 0.6% against a basket of currencies to 93.14.
In corporate news, DXC Technology Company (DXC) shares fell 8.3% intraday, the worst performer on S&P 500, after JPMorgan downgraded the firm to underweight from neutral while adjusting its price target to $45 from $42.
Tesla (TSLA) is looking to beef up legal teams in China amid scrutiny over how it handles safety and customer service complaints, media reports said, citing the firm’s WeChat job post. The company is also said to be hiring lawyers specializing in data privacy protection and antitrust. Share slumped by 4.1% on Nasdaq.
Home Depot’s (HD) fiscal second-quarter results topped analyst views, but comparable sales faltered as a rapidly reopening economy weighed on do-it-yourself sales. Shares retreated by 4.5%, the steepest decliner on the Dow.
Tencent Music Entertainment (TME) posted mixed second quarter results and said it plans to “strengthen” operations as a recent regulatory decision in China is expected to impact its business going forward. Shares slumped by 12%.
In the metals markets, gold was down by 0.3% to $1,785.10, silver was down 0.6% to $23.66 an ounce and copper was down 2.8% to $420.1 per pound.
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Stocks Plunge, Dollar Index Rises as Delta Variant Spreads
