S&P 500, Nasdaq fall more than 500 points after discovery of new virus variant

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S&P 500, Nasdaq fall more than 500 points after discovery of new virus variant

Travel, bank, and commodity-linked stocks bear the brunt of a sell-off triggered by the discovery of a new and possibly vaccine-resistant coronaviruses variant, which dragged Wall Street's main indexes lower on Friday.

Cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line plunged more than 9% each, while shares in American Airlines, Delta Air Lines and American Airlines fell almost 10%.

In early trading, ten of the 11 major S&P sectors dropped, with energy sliding 6.3%, followed by financials and industrials.

The domestically focused Russell 2000 small-cap index fell by 3.6%, hitting its lowest level in over four weeks.

The S&P 500 banks index plunged 5.1% as investors pared back bets of faster U.S. interest rate hikes.

Global stock markets fell sharply after reports that the new variant was detected in South Africa, with scientists saying it has an unusual combination of mutations, may be able to escape immune responses and could be more transmissible.

The European Union, Britain and India have announced stricter border controls. A top U.S. infectious disease official said there was a possibility of a ban on flights from southern Africa.

Peter Garnry, head of equity strategy at Saxo Bank, said that equity is reacting negatively because it is not known how effective the vaccines are against the new strain, and therefore it increases the risk of new lock-downs, which leads to an economic hit.

The Dow Jones Industrial Average was down by 906.49 points, or 2.53%, at 34,897, according to the Dow Jones Industrial Average. 89, tracking its worst day since October 2020.

The S&P 500 was down 86.05 points, or 1.83%, at 4,615. 41 and the Nasdaq Composite were down 214.71 points, or 1.36%, at 15,630. The CBOE volatility index, commonly known as Wall Street's fear gauge, jumped to its highest level since Sept. 20.

The rise in U.S. inflation, coupled with strong economic data and the renomination of Jerome Powell as the Fed Chair by President Joe Biden, has prompted market participants to raise their bets on early interest rate hikes next year, knocking U.S. stocks off their record levels this week.

Jeff Carbone, managing partner at Cornerstone Wealth, said that the new variant news seems to be a big catalyst that adds to the already overvalued market looking for a reason to take a breather.

Stay-at-home names such as Netflix Inc, Peloton Interactive and Zoom Video Communications jumped between 1.3% and 8.4%.

The defensive health care sector outperformed, boosted by vaccine makers such as Pfizer Inc and partner BioNTech and Moderna Inc, which climbed between 7.3% and 21.9%.

The short trading session is expected to be light as markets close at 1 p.m. Eastern Time, a day after the Thanksgiving holiday.

Declining issues outnumbered advancers for a 7.68 to 1 ratio on the NYSE and a 5.17 to 1 ratio on the Nasdaq.

The S&P index recorded six new 52 week highs and 19 new lows, while the Nasdaq recorded 12 new highs and 203 new lows.