May 20, 2022
Stock market chart

US stock index futures have fallen as a resurgence in Covid-19 cases causes renewed fears of a global slowdown in growth..

Stocks of firms most likely to benefit from a swift removal of pandemic restrictions were hit the hardest, with shares of cruise company Royal Caribbean as well as airlines United, Delta and American all falling more than 2%. Stocks linked to the global economy, such as Boeing and General Motors, also shed around the same figure.

The number of Covid cases has risen dramatically in the US this month, due to the emergence of the delta variant of the virus. The 7-day average number of daily cases is close to 30,000, up from approximately 11,000 cases per day a month ago. The rapid rise in numbers is likely to bring about fresh restrictions and the disruption to business that entails.

Futures contracts tied to the Dow Jones Industrial Average dropped by 1.1%, whilst S&P 500 futures and Nasdaq-100 futures fell 0.8% and 0.4% respectively. The 10-year Treasury yield fell below 1.25%, in a new 5-month low that reflects concerns over a possible slowing of the economy.

“The rise in cases is highly likely to bring further restrictions, and with it a meaningful deceleration in earnings and economic growth,” said Kusler Group’s Scott Hill, adding: “it’s highly likely we will see downward revisions to 2021 GDP growth for a number of economies”.

Federal Reserve policy responses will be key to turning investor sentiment around, according to Hill, who warned that further disruptions to service could be the final nail in the coffin for many business that have already suffered immeasurably.

Anything the Fed can do to ease inflation fears will be a big help, with a consumer sentiment index recently released by the University of Michigan showing that consumers believe prices will jump by 4.8% over the coming year.