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The US stock market remains under the dark clouds of rising delta variant cases which possibly derail the economic recovery. Market analysts ask to maintain caution.
The rising number of Delta variant cases in the US has got Wall Street investors worried, on Tuesday, September 7, Dow Jones Industrial Average (INDEXDJX: .DJI) tanked 270 points closing at 35,100 levels.
Similarly, the S&P 500 (INDEXSP: .INX) also closed 0.3% lower at 4,520 levels. On the other hand, the Nasdaq Composite (INDEXNASDAQ: .IXIC) closed in green but with less than 0.1% gains. The severe rise in the delta variant cases can be a major roadblock to the US economic recovery.
Over the last weekend, Goldman Sachs was among the first to downgrade the economic outlook. The banking giant cited the delta variant cases along with the fading fiscal stimulus. For 2021, Goldman cuts down the annual growth to 5.2%, down from the 6.2% consensus.
Furthermore, the firm has cut down on its fourth-quarter GDP outlook from 6.5% to down at 5.5%. In a note to investors, the banking giant noted:
“The hurdle for strong consumption growth going forward appears much higher: the delta variant is already weighing on Q3 growth, and fading fiscal stimulus and a slower service sector recovery will both be headwinds in the medium term”.
Shares of Boeing (NYSE: BA) dragged the market lower with a 1.8% drop. Furthermore, WSJ reported that the company will be delaying the deliveries of the 787 Dreamliner to late October. The aircraft maker has been unable to persuade the air-safety regulators for approving its proposal to inspect the aircraft.
Morgan Stanley Downgrades US Equities amid Delta Variant Fears
Another major banking giant Morgan Stanley (NYSE: MS) has downgraded US equities to underweight. In a note to clients on Tuesday, September 7, Morgan Stanley strategists led by Andrew Sheets said:
“We see a bumpy September-October as the final stages of a mid-cycle transition play out. We continue to think this is a ‘normal’ cycle, just hotter and faster, and our cycle model remains in ‘expansion’. But the next two months carry an outsized risk to growth, policy and the legislative agenda.”
Besides, the banking giant also downgraded three stocks in the pharma sector. This includes Johnson and Johnson (NYSE: JNJ), Merck (NYSE: MRK), and Amgen (NASDAQ: AMGN).
Historically, September has been the month of subdued performance for the market. The August report has also fallen short of expectations amid the rising delta variant cases. On a year-to-date basis, all three indices are trading strongly with 15-20% gains. In a note last Friday, Bank of America said:
“Admittedly, passive investors have yet to feel pain. 2021 represents yet another year during which the [S&P 500] has crushed it, but some signs indicate that it may be time to start getting ‘pickier’ when it comes to stocks.”
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