Six Months into Biden's Inauguration... Financial Markets Collapse Again Amid Delta Fear

Biden Emphasizes Economic Recovery but Market Plummets Due to Delta Variant
Government Bond Yields Enter 1.1% Range
New York Stock Market Dow Jones Falls 900 Points
Crude Oil Drops 8% Amid Concerns Over Slowing Economic Recovery and Increased Supply

[Asia Economy New York=Correspondent Baek Jong-min] On the eve of U.S. President Joe Biden's 6-month inauguration anniversary, the fear of COVID-19 has resurfaced, throwing the financial markets into turmoil.

Dow Jones Index Trend

Concerns over growth slowdown due to the Delta variant have stimulated safe-haven investment sentiment, causing bond prices to strengthen, while risk assets such as stocks and cryptocurrencies are simultaneously plunging.

As of 2:45 p.m. local time on the 19th, the Dow Jones Industrial Average in the New York stock market was trading at 33,768.15, down 919 points (2.65%), the S&P 500 index fell 93.63 points (2.16%) to 4,233.97, and the Nasdaq index dropped 217.32 points (1.51%) to 14,216.42.

The Dow posted its largest decline this year. CNBC reported it as the biggest drop since September last year.

President Biden emphasized that jobs have recovered since his inauguration and that the economy recorded its highest growth rate in six months, asserting, "The economy has revived from the brink, and there are no inflation concerns," but he could not prevent the financial market plunge that day.

Airline stocks including Delta and United, as well as aircraft manufacturer Boeing, fell by as much as 5%. Cruise line stocks also remained weak.

Retailers showed mixed stock performance similar to the early days of COVID-19; department store chain Macy's fell 5%, while food-focused retailers Costco and Kroger rose. Costco's stock hit an all-time high that day.

Brian Yabrou, an analyst at Edward Jones, explained, "The increase in new infections due to the Delta variant and the reinstatement of indoor mask mandates in the LA area are driving investors toward proven COVID-19 beneficiary stocks."

U.S. President Joe Biden is delivering a speech on economic recovery and infrastructure investment as he marks six months in office.
[Image source=AP Yonhap News]

Semiconductor stocks such as Nvidia and AMD showed strength.

U.S. Treasury yields entered the 1.1% range. On that day, U.S. Treasury yields quickly dropped from 1.27% to 1.176%. A decline in bond yields means a rise in bond prices.

At the beginning of the year, U.S. Treasury yields surged from 0.9% to 1.7%, reflecting inflation concerns due to early economic recovery, but now safe-haven demand is drawing in investors worried about a potential economic slowdown.

Concerns over slowing economic recovery also dragged down the previously soaring oil prices. West Texas Intermediate (WTI) crude oil plunged 8.2% to trade at $65.9. The OPEC+ agreement to increase oil production also contributed to the price decline, indicating that both demand and supply factors caused downward pressure. Energy stocks also fell sharply by over 3% due to the oil price plunge.

Mohamed El-Erian, Chief Economic Advisor at Allianz, explained, "Technical adjustments and growth slowdown concerns are simultaneously reflected, causing all asset classes to fall together."

The VIX, known as the fear index, surged by 6 points to 24.8, reflecting market anxiety. The VIX reached its highest level since May that day.

Mike Wilson, U.S. equity investment strategist at Morgan Stanley, warned, "The market is defensively responding to the possibility of economic growth slowdown and corporate earnings decline," and said a 10-20% correction could occur.

On the other hand, Bill Ackman, founder of Pershing Square, who has heavily invested in economic reopening beneficiary stocks, said in an interview with CNBC, "The Delta variant is not a serious threat to economic reopening," expecting Treasury yields to rise again and stating, "I will borrow as much money as possible at today's rates."

This content was produced with the assistance of AI translation services.