The Dow Jones Industrial Average (DJINDICES:^DJI) is down 863 points, or 2.5%, as of 1:14 p.m. EDT on July 19, as investors send travel, banking, and energy company stocks down sharply. Today's sharp sell-off, which is on track to be the Dow's worst day since last October, is happening as cases of COVID-19 surge in the U.S. and around the world, threatening to derail a strong economic recovery.
Leading the sell-off today are shares of Boeing (NYSE:BA), down almost 6% on a big decline for airline stocks. Bank stocks American Express (NYSE:AXP), Goldman Sachs (NYSE:GS), and JPMorgan Chase (NYSE:JPM) are all down 3.5% or more, and shares of global oil and gas giant Chevron (NYSE:CVX) are down almost 4%, with crude oil futures off more than 6% today.
Delta variant threatening global travel recovery, potentially hurting Boeing's aircraft orders
The highly transmissible Delta variant of the coronavirus is rapidly spreading, surging in unvaccinated populations and threatening to halt the global economic recovery in its tracks. Today's biggest Dow loser is aerospace giant Boeing, with shares falling sharply along with those of many of its biggest customers. Shares of many of the world's largest airlines are also down big today as investors fear a return to travel restrictions at a time when air travel is surging, or a decline in demand if passengers fear the risk of exposure.
For Boeing, the worry is that if the recovery in air travel stalls, the recent momentum with new aircraft orders could stall, further delaying the company's recovery.
Crude oil supply deal, coronavirus surge, have energy investors worried
Chevron shares are down sharply today, joining the vast majority of energy stocks with big losses as crude oil prices plummet. Both Brent and West Texas Intermediate crude oil futures are down $5 or more per barrel at this writing, back below $70 per barrel on a combination of factors. The first factor is the same news that's sending Boeing and other travel stocks lower today: COVID-19 fears. But there's also the impact of the OPEC+ deal that will increase oil production in coming months.
There's a little bit of irony to the oil and energy stock sell-off being tied to the OPEC+ deal. Sure, increasing supply should push prices lower, but late last week there were concerns that the cartel, which controls a massive portion of global oil and gas, was at an impasse, and its deal was at risk of unraveling. It includes a series of increases. Had there not been a deal, it is expected output would have increased even more than the level in the deal.
Nonetheless, investors are clearly fearful that the mix of increased oil output, and surging COVID-19 cases and hospitalizations will be a bad combination for oil stocks. The Energy Select Sector SPDR ETF (NYSEMKT: XLE), which tracks all of the energy sector stocks in the S&P 500, is down more than 4% at this writing.
Investors bailing on financial stocks, looking to the "safety" of bonds
The COVID-19 surge has investors moving away from bank and financial services stocks today as well, with three of the five worst-performing Dow Jones stocks coming from that sector. Banks have avoided the worst of the financial struggles they typically go through during global economic collapses such as we saw in 2020. But fresh fears of a stalled economic recovery have investors selling this sector sharply today.
Today's sell-off, however, isn't so much about any particular sector (though some are being hit harder than others) as much as it's due to worries about continued volatility and downside for stocks. Bond yields are down today, meaning that investors are willing to pay more to buy bonds, pushing yields lower to have the security of the bond's redemption value and a predictable yield.
A buying opportunity?
Today's sell-off has intensified in afternoon trading as investors look for certainty in the near term. For investors with the discipline to ride out periods of downside volatility, and uncertainty in the short term, this sell-off could prove to be a buying opportunity.
At this writing, the Dow Jones Industrial Average and S&P 500 indexes are both down about 3.4% from their recent highs over the past week, but they're up more than 100% over the past five years, and 248% and 298%, respectively, over the past decade. Compare that to only 33% and 106% over the same periods for the Vanguard Long-Term Bond ETF (NYSEMKT: BLV).
Bonds can be excellent holdings if you're looking to protect money you'll need in the near term. But if your goal is building long-term wealth, stocks are still the way to go.