Stocks fell on Monday morning, losing momentum after hitting all-time highs late last week. Commodity prices fell as concerns over the spread of the coronavirus resurfaced, with crude oil prices trending sharply lower.
The S&P 500 fell as shares of oil companies such as Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) fell. The Dow Jones also fell, weighed down by a drop in Chevron shares (CVX).
West Texas Intermediate Crude Oil Futures (CL = F) fell more than 4% from Monday morning session low to hover around $ 65 a barrel, extending further weekly decline 7.5% last week. Brent crude (BZ = F), the international standard, also fell. Other commodities also fell on Monday morning, including copper, silver and gold futures contracts each down at least 1%. T-bill yields fell across the curve and the benchmark 10-year yield fell below 1.28%.
The moves came amid growing concerns over coronavirus infection rates and new restrictions in China, a major demand center for global commodities.
The world’s second-largest economy has put new measures in place, including flight cancellations and other travel restrictions in some of the hardest-hit areas of the country, in an attempt to limit the spread of the virus. China’s National Health Commission last confirmed 125 new infections from Sunday, against 96 the day before.
“The virus count is still very low compared to other countries. But the spread of the Delta variant challenges China’s ‘zero-COVID’ approach. As most governments are now starting to recognize that we will probably have to live with the coronavirus for the long term, China’s ambition remains to keep it completely out of the country, ”wrote Neil Shearing, group chief economist for Capital Economics, in a note Monday morning.
“Without a change in approach, this suggests that China will have to continue with occasional local blockades and restrictions on movement,” he added. “This in turn will prevent a complete return to pre-pandemic consumer and business standards of behavior, and it will likely mean that restrictions on overseas travel will remain in place for some time to come.”
Concerns about the Delta variant have also been evident in quarterly profit calls for a multitude of large companies, raising the specter of another deceleration in consumer spending on services. Booking Holdings (BKNG) CEO Glenn Fogel said last week that the increase in the number of COVID cases and the newly imposed travel restrictions “led to a slight decline” in travel booking trends in July by report to June. Likewise, Lumber Liquidator Holdings (LL) suggested investors “forecast a slowdown in comparable sales” as the home improvement retailer operates on potential shifts in consumer demand and the potential impact of the delta variant of the. COVID-19, “CFO Nancy Walsh said at the company’s earnings call meeting last week.
Nonetheless, a number of economists have nonetheless pointed to the continued strength of the economic recovery in the United States, even as new risks around the virus emerge. The US economy created more than 900,000 jobs in July and June, according to Friday’s employment report, and separate surveys of manufacturing and service sector activity indicated continued expansion.
The results of US companies, on the whole, have also been strong. 89% of S&P 500 companies had released second quarter results on Friday, 87% of them beating Wall Street estimates for earnings per share, according to FactSet data. If this proportion holds, it would be the highest percentage of S&P 500 companies topping earnings estimates since at least 2008.
The quarterly earnings season continues this week with companies from Coinbase (COIN) to Disney (DIS) releasing their results.
9:32 a.m. ET: Stocks drop as commodity prices drop
Here’s where the markets were trading shortly after the opening bell:
S&P 500 (^ GSPC): -3.24 (-0.07%) to 4,433.28
Dow (^ DJI): -80.15 (-0.23%) to 35,128.36
Nasdaq (^ IXIC): +8.37 (+ 0.02%) to 14,837.80
Raw (CL = F): $ -1.79 (-2.62%) to $ 66.49 per barrel
Gold (CG = F):-$ 18.90 (-1.07%) to $ 1,744.20 per ounce
10-year cash flow (^ TNX): -1.6 bps for a yield of 1.272%
7:11 a.m. ET Monday: Trading in equity futures is mixed
Here’s where the markets were trading on Monday morning:
S&P 500 Futures Contracts (ES = F): -6.25 points (-0.14%) to 4,423.25
Dow Futures (YM = F): -104.00 points (-0.3%) to 34,987.00
Nasdaq Futures (NQ = F): +25.25 points (+ 0.17%) to 15 120.75
Raw (CL = F): -2.75 $ (-4.03%) to 65.53 $ per barrel
Gold (CG = F):-$ 12.90 (-0.73%) to $ 1,750.20 per ounce
10-year cash flow (^ TNX): -0.6 bps for a yield of 1.282%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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