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Wall Street set to drop at open after spike in new virus cases

FILE PHOTO: Traders exit the 11 Wall St. door of the New York Stock Exchange (NYSE) in New York City, New York, U.S., June 11, 2020. (REUTERS/Brendan McDermid)

BY DEVIK JAIN AND MEDHA SINGH

Wall Street was set to drop sharply at the open on Monday as a recent jump in coronavirus cases in China and parts of the United States dashed investor hopes of a quick economic rebound that had powered the Nasdaq to record levels last week.

Battered shares of U.S. airlines, resorts and cruise operators slumped again after attempting a rebound over the past month.

United Airlines Holdings Inc <UAL.O>, Norwegian Cruise Line Holdings Ltd <NCLH.N> and Wynn Resorts <WYNN.O> fell between 5.1% and 10.1% in premarket trading.

Beijing re-imposed measures to curb the spread of the virus after a wholesale food market saw an unexpected spike of cases. A record number of new infections and hospitalizations were reported in more U.S. states, including Florida and Texas, over the weekend.

The CBOE volatility index <.VIX>, a gauge of investor anxiety, jumped to its highest level since April 22 to 44.44 points.

“People are fearful about new cases rising, but at some point when you move 45% off the lows in such a short period of time, any excuse will do to have a nice consolidation of the gains,” said Thomas Hayes, managing member at Great Hill Capital Llc in New York.

Trillions of dollars in fiscal and monetary stimulus along with easing of restrictions had lifted the S&P 500 earlier last week as much as 47.5% from the pandemic low in March and helped the tech-heavy Nasdaq confirm a bull market.

But, a dismal economic outlook from the U.S. Federal Reserve and jitters over a resurgence in coronavirus cases sent the Wall Street’s main indexes for their worst week since March.

Beginning Tuesday, investors will focus on Fed Chair Jerome Powell’s two-day testimony before the Congress on the monetary policy report.

At 8:07 a.m. ET, Dow e-minis <1YMcv1> were down 573 points, or 2.24%. S&P 500 e-minis <EScv1> were down 59.75 points, or 1.97% and Nasdaq 100 e-minis <NQcv1> were down 127.25 points, or 1.32%.

The benchmark S&P 500 index <.SPX> was set to open below its 200-day moving average, a closely watched technical indicator.

Stocks from economically-sensitive sectors, including financials and energy, also fell. U.S. lenders Bank of America Corp <BAC.N>, Citigroup Inc <C.N> and Morgan Stanley <MS.N> dropped 3.5% to 4%.

Oil majors Exxon Mobil Corp <XOM.N> and Chevron Corp <CVX.N> shed about 3% each.

Moderna Inc <MRNA.O> rose 5.1% after a report said Israel is in advanced talks with the drug developer to buy its coronavirus vaccine.

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