Stock Futures, Oil Drop as Delta Variant Sends Investors Into Bonds

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U.S. stock futures, oil prices and government bond yields slid, amid anxiety that the spread of the Delta coronavirus variant would hold back the global economy.

Futures for the S&P 500 fell 1%, signaling opening losses for the broad stock-market gauge after it snapped a three-week winning streak Friday. Contracts for the Dow Jones Industrial Average dropped 1.2%. Futures on the technology-focused Nasdaq-100 fell 0.8%.

In a sign that investors were sheltering in the safety of government bonds and other haven assets, the yield on 10-year Treasury notes fell to 1.235% Monday from 1.30% Friday. Yields, which fall when bond prices climb, haven’t been that low since mid-February. The WSJ Dollar Index, which tracks the greenback against a basket of other currencies, rose 0.3%.

Oil prices fell after the Organization of the Petroleum Exporting Countries and a Russia-led group of big producers agreed to raise production. Futures on Brent crude, the international benchmark, fell 3% to $71.41 a barrel, their lowest level since mid-June.

The moves were reminiscent of trading patterns that prevailed in the early days of the pandemic. Investors sold shares of companies directly affected by restrictions on movement and business, while buying government bonds and stocks that stood to benefit from the work-at-home phenomenon.

Surging cases of the coronavirus in many parts of the world, including highly-vaccinated countries such as the U.K., have prompted investors to dial down their expectations of economic growth in the coming months. Some also are concerned that a steep rise in prices will pinch consumption and prompt central banks to withdraw stimulus, creating an environment of lower growth and higher inflation in which stocks tend to struggle.

“The emergence of this more highly transmissible Delta variant…has brought into the question the sustainability of this reopening and the recovery,” said

Candice Bangsund,

a portfolio manager at Fiera Capital. She doesn’t think the variant will derail a big pickup in economic activity and views the selloff as a chance to scoop up shares of energy producers, industrial firms and financial companies.

The inflation rate reached a 13-year high recently, triggering a debate about whether the U.S. is entering an inflationary period similar to the 1970s.

Airlines and oil-and-gas companies were among the worst performers ahead of the bell in New York.

Occidental Petroleum

lost 4.9%, United Airlines 4%,

Diamondback Energy

3.7% and

American Airlines Group

3.5%.

One bright spot was

Five9,

which jumped 8.3% on news that

Zoom Video Communications

plans to buy the provider of cloud-based customer-service software in a deal valuing the firm at $14.7 billion. Zoom shares slipped 2.5% in premarket trading.

Adding to the caution among investors is evidence that inflation, which accelerated to a 13-year high in the U.S. in June, has started to knock consumers’ confidence in their ability to keep spending. For much of 2021, business reopenings, rising vaccination rates and government pandemic aid have helped propel rapid gains in consumer spending, the economy’s main driver.

“What you’re seeing is a sense that the consumer is starting to be affected quite significantly” by the jump in prices, said

Sebastien Galy,

senior macro strategist at Nordea Asset Management.

Worries about the economic effects of the virus were evident in a broad retreat in global markets. The regional Stoxx Europe 600 slid 1.9%, led lower by shares of economically sensitive travel, leisure and commodities companies, alongside banks.

Among other stocks, Paris-listed

Vivendi

fell 1.5%. Pershing Square Tontine, a blank-check company led by hedge-fund manager

Bill Ackman,

said it had dropped plans to purchase a 10% stake in Universal Music Group. Mr. Ackman’s Pershing Square said it would take a large stake in Universal, which is majority owned by Vivendi, instead.

Italian luxury fashion house Ermenegildo Zegna will go public on the New York Stock Exchange later this year as part of a tie-up agreement with special-purpose acquisition corporation Investindustrial Acquisition. Shares of the SPAC, whose chairman is former UBS CEO

Sergio Ermotti,

edged down before the bell in New York.



Read More:Stock Futures, Oil Drop as Delta Variant Sends Investors Into Bonds

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