U.S. stocks fell sharply Monday, joining a global equity selloff blamed in large part on concerns about the spread of the delta variant of the coronavirus that causes COVID-19, but also to ratcheting up tensions between the U.S. and China.

What are major indexes doing?

The Dow Jones Industrial Average
DJIA,
-2.45%

was down 706 points, or 2%, at 33,982. The blue-chip gauge was down more than 800 points at its session low.

The S&P 500
SPX,
-1.81%

dropped 65 points, or 1.5%, to 4,261.

The Nasdaq Composite
COMP,
-1.14%

gave up 125 points, or 0.9%, at 14,300.

The small-cap Russell 2000
RUT,
-0.77%

shed 16 points, or 0.7%, to 2,147. A close below 2,124.15 would mark a pullback of 10% from its recent high, meeting the widely used definition of a market correction.

Stocks ended lower Friday, with all three major indexes down for the week, ending a string of three, consecutive weekly wins. The Dow saw a 0.5% weekly decline, while the S&P 500 slid 1% and the Nasdaq Composite shed 1.9%.

What’s driving the market?

Pressure on global equity markets Monday was attributed largely to the continued rise in the number of COVID-19 cases world-wide, but also to concerns about “peak everything” and to rising U.S. and China tensions.

“The delta variant is getting a lot of attention right now as an explanation for weakness,” said Sahak Manuelian, head of equity trading at Wedbush Securities in Los Angeles told MarketWatch.

“Another good reason is really peak everything: peak valuations, peak growth,” he said. “Add in the delta variant and you have a decent case for why stocks are lower.”

“But the third things, which might be the most troubling, is U.S.-China relations. They are certainly getting worse.”

The Biden administration on Monday blamed China for a hack of Microsoft Exchange email server software that compromised tens of thousands of computers around the world earlier this year. The European Union and Britain also pointed the finger at China.

Need to Know: COVID-19 cases may cause an S&P 500 correction, analyst says — buy these stocks in the next dip

On the pandemic front, concerns about the virus have been particularly problematic for sectors and industries, such as travel, that were expected to benefit the most from the reopening of the global economy. Airline stocks tumbled, with the industry-tracking U.S. Global Jets ETF
JETS,
-3.86%

dropping more than 3.5%, while plane-maker Boeing Co.
BA,
-5.43%
,
a Dow component, dropped 4.5%, on fears the spread of the variant could trigger renewed travel restrictions.

Also Monday, Treasurys continued to rally, keeping pressure on yields, which move in the opposite direction of prices. The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.205%

was down about 9 basis points to trade near 1.21%, after dipping below 1.19% for the first time since mid-February.

“Although it seemed like there was an opportunity to end up in the green following retail sales coming in better-than-expected, our streak of winning weeks in the market has come to an end,” wrote Chris Larkin, managing director trading at E-Trade Financial, in emailed comments.

“And while pullbacks like we’re seeing today can rattle the nerves, it’s important to remember that the market is near all-time highs, and corrections are a natural part of a healthy market,” he said.  

Sam Stovall, chief investment strategist at CFRA, in a note, said that in the week ahead, investors will likely regard a further weakening of bond yields as a potential ‘canary in the coal mine.’”

The strategists said that the declines could potentially overshadow earnings season, which has thus far been strong. About 85% of S&P 500 companies that have reported beating expectations and none providing guidance lower than expectations so far, according to John Butters, senior earnings analyst at FactSet.

“In an attempt to divine this message, the market may dismiss future better-than-expected EPS (earning sper share) growth as symptomatic of the transition from the windward to the leeward slope of the current EPS cycle as it passes its peak, resulting in increased volatility,” Stovall said.

Read: Does the bond market have it wrong about inflation?

Earnings season picks up steam this week, with nearly a third of the 30 Dow Jones Industrial Average components and more than 80 S&P 500 companies are expected to report quarterly results.

Earnings highlights for the week ahead include Netflix Inc.
NFLX,
-0.30%

on Tuesday and Intel Corp.
INTC,
-1.12%

on Thursday.

Earnings Preview: What does a mature streaming service look like? Netflix is about to show us

Oil prices were sliding, with the U.S. benchmark
CL00,
-6.65%

down 6.4% to trade near $67 a barrel after the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed on Sunday to a deal that will ease output curbs. Major producers will add 400,000 barrels a day in production each month beginning in August until existing curbs totaling 5.8 million barrels a day are erased later next year.

Analysts said the extended slide, however, was likely due more to concerns about the delta variant and a widespread selloff across assets perceived as risky than the OPEC+ decision.

Meanwhile, the National Association of Home Builders said its monthly confidence index fell one point to a reading of 80 in July.

Which companies are in focus?

Robinhood Markets Inc.
HOOD,

set terms for its initial public offering, in which the California-based retail trading platform could be valued at up to $35.1 billion.

AutoNation Inc.
AN,
+4.91%

on Monday second-quarter quarter profit and revenue that easily topped expectations, with particular strength in used car sales. Shares were up 5.1%.

Shares of Five9 Inc.
FIVN,
+5.66%

rose 5.2%, after the announcement of a $14.7 billion all-stock buyout deal by Zoom Video Communications Inc. ZM, over the weekend. Zoom shares slumped 3.5%.

Bill Ackman’s Pershing Square Tontine Holdings
PSTH,
-0.99%

said Monday that it was abandoning a deal to buy a 10% stake in Universal Music Group, citing regulatory and shareholder concerns. PSTH shares were down 0.7%.

Cal-Maine Foods Inc.
CALM,
-4.73%

 reported Monday a surprise fiscal fourth-quarter loss and revenue that fell below expectations, with egg sales dropping as the lifting of COVID-19-related restrictions led to less meals prepared at home. Shares were down 3.3%.

What are other markets doing?

The ICE U.S. Dollar Index
DXY,
+0.12%
,
a measure of the currency against a basket of six major rivals, rose 0.2%.

Gold futures
GC00,
-0.43%

were down 0.4% near $1,808.60 an ounce.

In European equities, the Stoxx Europe 600
SXXP,
-2.30%

dropped 2.3%, while London’s FTSE 100
UKX,
-2.34%

was off 2.3%.

In Asia, the Shanghai Composite
SHCOMP,
-0.01%

fell fractionally, while the Hang Seng Index
HSI,
-1.84%

shed 1.8% and Japan’s Nikkei 225
NIK,
-1.25%

dropped 1.3%.

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