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The stock market shrugged off rising Covid-19 infections due to the Delta variant Monday. And that makes sense: Despite Covid issues, investors are feeling a little better about the outlook for corporate earnings and the U.S. economy in the second half of 2021.
Judging by the headlines, the Delta variant of the Covid-19 virus is poised to derail the second half of 2021. Cases are soaring once again, and concerns about breakthrough cases are making headlines everywhere—a study of cases in the county containing Cape Cod showed that 74% were in people who’d been vaccinated—as states reconsider their masking and back-to-school policies.
But the market might have already responded to the fears: On July 19, the
Dow Jones Industrial Average
dropped 2.1%, its worst day since October, while the
S&P 500
dropped 1.6%.
Back then, the seven-day average of new cases in the U.S. sat at about 35,000, up almost 50% over the seven-day average from a week before. Worldwide, the seven-day average on July 19 was about 521,000 new cases, up 17% from the prior week.
But the market recovered even as infection rates got worse. The S&P 500 hit a new 52-week high on July 29, despite no abatement in Covid-19 data, but slipped 0.2% on Monday. The
Dow Jones Industrial Average
declined 0.3%, while the
Nasdaq Composite
rose 0.1%.
Coming into Monday, the seven-day average of new Covid cases in America is about 80,000 now, up 129% since the seven-day period ending July 19. S&P 500 and Dow Jones Industrial Average futures, however, are up about 0.5% and 0.4%, respectively. The takeaway: Investors don’t seem to care about Covid anymore.
That might seem strange but makes some sense. First, investors might be viewing the recent surge as a U.S.-only problem. The worldwide seven-day average of new Covid cases is about 596,000, up 15% from the seven-day period ending July 19. That’s a better comparison than the up 129% figure for the U.S. And excluding American figures, the worldwide seven-day average is about 517,000 a day, up 6% from the level on July 19.
Investors might also be more optimistic because widespread lockdowns don’t look likely. Even if indoor masking comes back for fully vaccinated people, Dr. Anthony Fauci said over the weekend he did not think the U.S. would lockdown again.
And Thomas Lee of FundStrat pointed out in a Monday email to clients that new hospitalization rates are slowing. That’s another positive that investors can point to.
Whether it stays that way remains to be seen.
Write to allen.root@dowjones.com
