Producers of metals and other raw materials slid as traders rotated out of bets on the acceleration of global economic growth, fearful of a new hit to global growth from the Covid-19 pandemic.
The SPDR Select Materials exchange-traded fund, which tracks the materials industry group on the Standard & Poor's 500, sank into correction territory, more than 10% below recent highs. Other indexes heavily weighted towards cyclical sectors like materials -- including the Russell 2000 index of small caps -- were flirting with correction territory.
One brokerage said the flight from risk could be a false alarm. "We expect the reflation trade -- cyclical stocks, bond yields, high beta stocks, reflation and reopening themes, to bounce imminently as Delta variant fears subside and inflation surprises persist," said strategists at brokerage JPMorgan, in a note to clients.
Ultimately, the Delta variant is unlikely to result in a series of lockdowns in major economic centers, a development that's currently being misguidedly priced into cyclical sectors, said the JPMorgan strategists.
Write to Rob Curran at rob.curran@dowjones.com
(END) Dow Jones Newswires
07-19-21 1649ET
