Traders and investors continued to sell stocks for a second day on Wall Street, sending major equity averages lower.
On Tuesday afternoon, the S&P 500 was trading at 4,125.40, down 0.92% for the day, while the Dow Jones was trading at 33,751.17, down 0.96%. The Nasdaq composite was trading at 13,748.14, down 1.20% for the day as tech stocks lost their momentum.
That's a big difference from last week when major averages continued their multiday winning streak aided by better news on the U.S. economy and strong earnings from large banks.
What has changed this week? The realization among market participants that vaccinations against Covid-19 are proceeding at a slow pace around the world, where infections continue to spread rapidly.
The rise of overseas cases fuels doubts about the sustainability of the economic recovery under the way. Thus, prompting traders and investors to sell off energy airline and travel-related stocks, which make up a big chunk of S&P 500 and Dow Jones.
The sell-off in airline and energy shares is further reflected in the sharp declines of Series Solutions U.S. Global ETF (JETS, Financial), down 4.22%, and the Energy Select Sector SPDR (XLE, Financial), down 2.60%.
In turn, doubt about the world economic recovery eased fears of rising inflation, which should be a good thing for stocks in general, but not for bank shares, which make up for another big chunk of the S&P 500. Lower Treasury bond yields depress the "spread," the difference between long-term and short-term rates, a negative development for bank profits. Banks borrow money at the short-term end of the yield curve and lend money at the long end. Thus, lower yields mean lower bank profits.
The selloff in bank shares is further reflected in the Financial Select Sector SPDR (XLF, Financial), which lost 2.10% of its value on Tuesday.
Then there's anxiety over upcoming reports from technology giants, beginning with Netflix (NFLX, Financial) and Adobe (ADBE, Financial) this afternoon. Both stocks have been high-fliers on Wall Street, raising concerns about whether expectations have been running ahead of reality.
While it is still unclear how major averages will finish the trading day, one thing is clear: volatility will continue on Wall Street.
Disclosure: I own shares of Adobe.
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