What happened 

Shares of travel and entertainment stocks fell on Monday as Wall Street weighed new concerns about COVID-19 impacting business. Marriott International (MAR -2.90%) fell as much as 5.8% in early trading, MGM Resorts International (MGM -5.01%) was down 5.9% at its low, and Six Flags Entertainment (SIX -2.00%) was down 10% early in the day. The stocks are down 2.6%, 3.1%, and 8% at 1 p.m. EDT. 

We haven't seen much direct effect from rising COVID-19 cases in the U.S. yet, but there may be an impact coming. Investors are worried that consumers will cancel or delay travel plans if cases continue to rise, which would delay a financial recovery for consumer discretionary stocks

Roller coaster on a sunny day.

Image source: Getty Images.

So what

The average number of new COVID-19 cases in the U.S. has jumped from 13,200 to 32,300 in the past two weeks and shows no signs of stopping. The delta variant, as it is known, is more contagious than previous variants and appears to be infecting even vaccinated people, although very few are getting seriously sick. With only about 50% of the U.S. vaccinated, it's possible that cases will continue to rise for months and people will cut back on travel as a result. 

Investors were betting there would be a boom in travel and entertainment spending this summer as COVID-19 cases came down, at least in the U.S. But that trend is reversing course and that could have an impact on company revenue and margins as well. 

After the last 18 months of just trying to get through the pandemic, companies like Marriott, MGM, and Six Flags have reported losses and stretched their balance sheets in hopes of a brighter day. After months of positive news, this recent COVID-19 scare could push back a full recovery. 

Now what

We don't yet know what impact rising COVID-19 cases will have on public policy or consumer behavior. Mask mandates are being put in place in some places, but not yet on a widespread basis. 

Even if public policy restrictions aren't put in place, consumer behavior could change across the country. People could decide not to go out to eat, take a vacation, or go to an entertainment venue in order to reduce their risk of infection. 

It's also possible the funding that was a lifeline to some companies will no longer be available from Washington, D.C. A reduction in demand combined with weakened balance sheets and no lifelines from the government could be bad news for travel and entertainment stocks. We aren't at a point where investors should panic, but there's fear in the market and that's why these stocks are down today.