US stocks plunged and then recovered Monday as fears about a new coronavirus strain in the UK damped optimism about Congress passing a new stimulus bill.
The Dow Jones industrial average tumbled as much as 423.52 points, or 1.4 percent, to 29,804.48 in early trading after British officials imposed a strict lockdown on London and other nearby areas over the weekend to stem the spread of the highly contagious strain.
But the blue-chip index reversed course to close up 0.1 percent, or 37.40 points, at 30,216.45 as lawmakers prepared to vote on a roughly $900 billion coronavirus relief package in Washington.
The benchmark S&P 500 similarly pared an early 1.9 percent drop to 0.4 percent, while the tech-heavy Nasdaq closed down 0.1 percent after falling as much as 1.8 percent.
Britain’s new COVID-19 strain and the attendant lockdown spooked Wall Street and suggested there may be bumps in the road to recovery that’s being paved as health officials roll out the first coronavirus vaccines that could help end the pandemic.
“Markets have adopted a light at the end of the tunnel approach since Pfizer and Moderna’s vaccines burst onto the stage,” said Jeffrey Halley, senior market analyst at OANDA. “However, the weekend’s events have delivered an unceremonious Monday morning wake-up call that negotiating [the first quarter] of 2021 could be a torturous affair.”
Investors had also been anticipating a stimulus deal for weeks despite the often rocky negotiations in Congress, meaning Sunday’s announcement wasn’t a major cause for celebration.
“The stimulus package was absolutely necessary and expected,” said James McDonald, CEO and chief investment officer of Hercules Investments. “Unfortunately, it won’t be enough to limit the economic fallout of COVID-19 and we will have to go through the process again, perhaps several times, until COVID-19 is behind us.”
Meanwhile, the CBOE Volatility Index — known as Wall Street’s fear gauge — surged more than 46 percent to an intraday peak of 31.46, its highest level since early November.
Wall Street followed European markets lower on Monday. London’s FTSE 100 closed down about 1.7 percent, while Paris’ CAC 40 dropped 2.4 percent and Germany’s DAX ended the day down 2.8 percent.
Oil prices also fell amid the lockdown fears. West Texas Intermediate crude oil futures were down about 2.7 percent at $47.79 a barrel as of 2:32 p.m. and Brent crude futures were also recently off 2.7 percent at $50.85 a barrel.
With Post wires