NEW YORK -- Resurgent pandemic worries knocked stocks lower from Wall Street to Tokyo on Monday, fueled by fears that a faster-spreading variant of the virus will upend the economy's strong recovery.
The S&P 500 fell 68.67, or 1.6%, to 4,258.49, after setting a record just a week earlier. In another sign of worry, the yield on the 10-year Treasury touched its lowest level in five months as investors scrambled for safer places to put their money.
The Dow Jones Industrial Average slumped 725.81, or 2.1%, to 33,962.04, while the Nasdaq composite lost 152.25, or 1.1%, to 14,274.98.
Even after allowing for Monday's declines, the Dow is up nearly 27% compared with the same time last year.
"Our streak of winning weeks in the market has come to an end," Chris Larkin, managing director of trading at eTrade, said in commentary Monday. "While pullbacks like we're seeing today can rattle the nerves, it's important to remember that the market is near all-time highs, and corrections are a natural part of a healthy market."
Airlines and other companies that would get hurt the most by potential covid-19 restrictions took some of the heaviest losses, similar to the early days of the pandemic in February and March 2020. United Airlines lost 5.5%, mall owner Simon Property Group gave up 5.9%, and cruise operator Carnival fell 5.7%.
Asian markets closed in the red across the board, with Hong Kong's Hang Seng Index leading the losses with a 1.8 percent slide and Japan's Nikkei falling 1.3 percent. European markets posted even bigger declines, with Germany's DAX and France's CAC 40 tumbling more than 2.5 percent and the Pan-European Stoxx 600 sliding 2.3 percent.
The price of benchmark U.S. crude, meanwhile, fell more than 7% after OPEC and allied nations agreed on Sunday to eventually allow for higher oil production this year.
Brent crude, the international oil benchmark, shed 6.9 percent to trade at $68.50 per barrel. West Texas intermediate crude, the U.S. oil benchmark, declined more than 7.6 percent to $66.94.
Even with the delta variant's rise, signs of a strong recovery have been abundant. U.S. air travel hit a post-pandemic high on Sunday, with the Transportation Security Administration reporting more than 2.2 million travelers passing through its checkpoints. Consumer spending, which powers the bulk of the economy, has been steady, with June retail sales beating expectations, the Commerce Department reported last week.
The World Health Organization says covid-19 cases and deaths are climbing globally after a period of decline, spurred by the highly contagious delta variant. And given how tightly connected the global economy is, a hit anywhere can quickly affect the other side of the world.
Even in the U.S., where the vaccination rate is higher than in many other countries, people in Los Angeles County must once again wear masks indoors regardless of whether they're vaccinated after spikes in cases, hospitalizations and deaths.
Across the country, the daily number of covid cases has soared by nearly 20,000 over the past two weeks to about 32,000. The vaccine campaign has hit a wall, with the average number of daily inoculations sinking to the lowest levels since January, and cases are on the rise in all 50 states.
That's why markets are concerned, even though reports show the economy is still recovering at a fantastically high rate and the general expectation is for it to deliver continued growth. Any worsening of virus trends threatens the high prices stocks have achieved on expectations the economy will fulfill those lofty forecasts.
Financial markets have been showing signs of increased concerns for a while, but the U.S. stock market had remained largely resilient. The S&P 500 has had just two down weeks in the past eight, and the last time it had even a 5% pullback from a record high was in October.
Several analysts pointed to that backdrop of high prices and very calm movements for weeks while dissecting Monday's drop.
"It's a bit of an overreaction, but when you have a market that's at record highs, that's had the kind of run we've had, with virtually no pullback, it becomes extremely vulnerable to any sort of bad news," said Randy Frederick, vice president of trading & derivatives at Charles Schwab. "It was just a matter of what that tipping point was, and it seems we finally reached that this morning" with worries about the delta variant.
He and other analysts say they are optimistic stocks can rebound quickly. Investors have been trained recently to see every dip in stocks as merely an opportunity to buy low.
Barry Bannister, chief equity strategist at Stifel, was more pessimistic. He says the stock market may be in the early stages for a drop of as much as 10% after its big run higher. The S&P 500 nearly doubled after hitting its bottom in March 2020.
"The valuations, they just got too frothy," he said. "There was just so much optimism out there."
The bond market has been louder and more persistent in its warnings. The yield on the 10-year Treasury tends to move with expectations for economic growth and for inflation, and it has been sinking since late March, when it was at roughly 1.75%. It fell to 1.20% Monday from 1.29% late Friday.
Analysts and professional investors say a long list of potential reasons is behind the sharp moves in the bond market, which is seen as more rational and sober than the stock market. But at the heart is the risk the economy may be set to slow sharply from its current, extremely high growth.
Besides the new variants of the coronavirus, other risks to the economy include fading pandemic relief efforts from the U.S. government and a Federal Reserve that looks set to begin paring back its assistance for markets later this year.
Monday's selling pressure was widespread, with nearly 90% of the stocks in the S&P 500 lower. Even Big Tech stocks fell, with Apple down 2.7% and Microsoft 1.3% lower. Such stocks seemed nearly immune to virus fears during earlier downturns, rising with expectations for continued growth almost regardless of the economy's strength.
Across the S&P 500, analysts are forecasting profit growth of nearly 70% for the second quarter from a year earlier. That would be the strongest growth since 2009, when the economy was climbing out of the previous recession.
But just as worries are rising that the economy's growth has already peaked, analysts are trying to handicap by how much growth rates will slow in upcoming quarters and years for corporate profits.
Information for this article was contributed by Stan Choe, Alex Veiga, Damian J. Troise and Yuri Kageyama of The Associated Press; and by Taylor Telford and Hamza Shaban of The Washington Post.