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NEW YORK (Reuters) – Wall Street fell into a large sell-off and U.S. Treasury yields fell Thursday as spike in COVID-19 infections raised the likelihood of a new round of economic downturns and investors are struggling with the knowledge that any potential vaccine remains months away from market arrival.
The sentiment of risk reduction was widespread, with economically sensitive cyclical stocks and small caps rallies on Monday and Tuesday, experiencing the steepest drops.
“The global sell-off is driven by the sharp spike in new coronavirus cases,” said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut. “And you are seeing it in Treasury yield, rising gold prices and selling off across the board, especially small caps and US equities.”
On Monday, Pfizer Inc PFE.N announced the COVID-19 vaccine candidate developed with German partner BioNTech SE BNTX.O appears to be 90% effective in preventing infections, news that has caused equity markets to surge around the world.
But new coronavirus infections in the United States and elsewhere are reaching record highs, and tightening economic restrictions to contain the spread has dampened the prospect of a near-term end to the global health crisis.
“You’re also realizing that while there was great news with Pfizer and the vaccine, … we’re a long way from having that vaccine and at least until the end of the year, COVID will play a big part in our lives and the economy.” added Pursche.
The Dow Jones Industrial Average .DJI fell 317.46 points, or 1.08%, to 29,080.17, the S&P 500 .SPX it lost 35.65 points, or 1.00%, to 3,537.01 and the Nasdaq Composite .IXIC it fell 76.84 points, or 0.65%, to 11,709.59.
The wave of new coronavirus infections has prompted a pullback in European equities from eight-month highs, with banks leading the decline as hopes for a rapid economic rebound fade.
The pan-European STOXX 600 index .STOXX it lost 0.88% and the MSCI index of equities worldwide .MIWD00000PUS shed 0,66%.
Emerging market equities were up 0.15%. MSCI’s broadest index of Asia Pacific equities outside of Japan .MIAPJ0000PUS closed 0.09% higher, while the Japanese Nikkei .N225 increased by 0.68%.
US Treasury yields, which can be seen as an indicator of risk appetite, plummeted due to risk sentiment and economic data that showed US inflation remains tepid.
10-year reference notes US10YT = RR The latest rose 33/32 in price to make 0.8815%, up from 0.989% late on Tuesday.
The 30-year bond US30YT = RR The latest rose 84/32 in price to make 1.6427%, up from 1.76% late on Tuesday.
Oil prices reversed early gains, triggering a three-day rally on growing doubts about a near-term recovery in demand and an unexpected surge in US inventories.
US crude CLcv1 it fell by 0.8% to 41.12 dollars a barrel, while the Brent LCOcv1 it stood at $ 43.53 a barrel, down 0.6% on the day.
The dollar fell slightly against a basket of currencies, reflecting investor caution regarding vaccine expectations in the latest wave of infections.
The dollar index .DXY fell by 0.06%, with the euro EUR = up 0.25% to $ 1.1807.
The Japanese yen strengthened 0.31% against the greenback to 105.12 per dollar, while the pound sterling GBP = the latest trade at $ 1.3119, down 0.77% on the day.
Risk appetite drew investors to gold, which continued to recover some ground that the safe haven metal lost in Monday’s crash.
Spot gold XAU = added 0.6% to $ 1,876.36 an ounce.
Reporting by Stephen Culp; additional reporting by Marc Jones; Editing by Marguerita Choy
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