Wall Street ended lower on Monday, with shares of Carnival Corp and several airlines tumbling as investors worried about the Omicron coronavirus variant ahead of a Federal Reserve meeting later this week.
Travel-related stocks fell, with the fast-spreading variant accounting for around 40% of COVID-19 infections in London and at least one death in the United Kingdom.
Norwegian Cruise Line Holdings, Carnival Corp and Royal Caribbean Cruises all slumped more than 4%, while the S&P 1500 airlines index shed about 3%.
“It’s transportation, restaurants, all the things that if it got bad enough that we started putting new restrictions on people, it would not be good for them,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta. “They have all been bid over the past several months by the idea that we were going to get back to business as usual.”
Canada’s benchmark stock index also fell, let by a pullback in the energy sector.
Most of the 11 major S&P 500 sector indexes fell, with only defensive sectors, including consumer staples, utilities and real estate gaining.
The Dow Jones Industrial Average fell 0.89% to end at 35,651.61 points, while the S&P 500 lost 0.91% to 4,669.15.
The Nasdaq Composite dropped 1.39% to 15,413.28.
Following Monday’s dip, the S&P 500 remains up about 24% year to date.
Apple Inc dipped 2.1%, even after J.P. Morgan raised its price target on the iPhone maker to the highest on Wall Street. The company is close to becoming the first in the world to hit US$3 trillion in market value.
Investors expect an increasingly hawkish tone out of the Federal Reserve’s two-day meeting that wraps up on Wednesday. The U.S. central bank is expected to signal a faster wind-down of asset purchases, which could also usher closer a start to interest rate hikes.
“Everyone is focused on the Fed this week and what guidance we get in terms of bond purchases and interest rates. There’s an expectation that there will be an acceleration of tapering, and there’s a little anxiety leading up to that,” said Ryan Jacob, chief portfolio manager at Jacob Internet Fund.
A Reuters poll of economists sees the central bank hiking interest rates from near zero to 0.25%-0.50% in the third quarter of next year, followed by another in the fourth quarter.
Positive updates about vaccines and antibody cocktails to combat the new COVID-19 variant, along with a recent reading on inflation that was in line with consensus, pushed the S&P 500 index to a record closing high on Friday.
Pfizer Inc rose 4.6% after it agreed to acquire Arena Pharmaceuticals in a $6.7 billion all-cash deal. Arena’s shares surged 80%.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 142.17 points, or 0.7%, at 20,748.45, its lowest closing level since Dec. 3.
The Bank of Canada unveiled an agreement with the federal government to keep its inflation target unchanged at 2%, adding that it would now take labor market factors into account as well, which could keep interest rates low for longer in times of crisis.
The Toronto market’s energy sector dropped 2.9% as oil prices declined. U.S. crude oil futures settled 0.5% lower at $71.29 a barrel.
Industrials fell 1.4%, while technology ended down 1.3%.
Rio Tinto has offered to write off Mongolia’s outstanding $2.3 billion debt for its share in the Oyu Tolgoi mine to advance the copper-gold project, the Asian country’s prime minister said.
Rio owns 51% of Turquoise Hill Resources, which owns 66% of the Oyu Tolgoi. Shares of Turquoise Hill ended 13.7% higher.
Volume on U.S. exchanges was 10.4 billion shares, compared with the 11.4 billion average over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 2.30-to-1 ratio; on Nasdaq, a 2.53-to-1 ratio favored decliners. The S&P 500 posted 52 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 33 new highs and 302 new lows.
The yield on 10-year U.S. Treasury notes was down 6.5 basis points to 1.424% and the 30-year Treasury bond yield was down 6.7 basis points to 1.817%.
Reuters, Globe staff
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