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Markets

Delta variant fears knock Dow to biggest decline in 9 months

New infections and restrictions sow doubts about strength of US recovery

Major U.S. indexes fell July 19 amid a resurgence in coronavirus infections nationwide.   © Reuters

NEW YORK -- U.S. stocks were shaken Monday by worries about the post-pandemic economic recovery, portending a continued sell-off in Asian markets.

The Dow Jones Industrial Average fell 725 points, or 2%, for the biggest decline in roughly nine months. All major U.S. indexes sank in a bout of global risk aversion, with the S&P 500 ending down 1.6% while the Nasdaq fell 1%.

Delta Air Lines, American Airlines and United Airlines fell, ranging from a drop of more than 3.5% to around 5.5%, while cruise operator Carnival dipped nearly 6%. Boeing and Walt Disney Co. suffered similar declines.

A U.S. stock market rally into mid-July is being tested by a resurgence in coronavirus infections this month, driven by the delta variant of the virus.

Investors have been confronted with signs of a return of restrictions on travel and other activities. The U.S. Centers for Disease Control and Prevention on Monday raised its travel alert for the U.K. to very high, telling Americans to avoid visits there.

On Sunday, Los Angeles County reinstated its mask-wearing rule for indoor public spaces.

With the Dow touching its most recent all-time high on July 12, Monday's sell-off to some extent reflected a desire among investors to cash in some gains. Morgan Stanley strategist Michael Wilson said U.S stocks are likely to see an adjustment of roughly 10% to 20%.

Risk-averse investors piled into bonds Monday, sending the yield on U.S. 10-year debt to a roughly five-month low.

The delta variant poses a risk to people in places where coronavirus vaccinations have yet to become widespread, such as Southeast Asia, or who have been reluctant to take a jab.

"For most people who get this delta variant, it's going to be the most serious virus that they get in their lifetime in terms of the risk of putting them in the hospital," former U.S. Food and Drug Administration head Scott Gottlieb told CBS show "Face the Nation" on Sunday.

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