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From cruise operators to airlines: ‘Reopening’ stocks tumble on variant fears

29 Nov 2021 00:00:00 | Update: 29 Nov 2021 01:51:28
From cruise operators to airlines: ‘Reopening’ stocks tumble on variant fears
United Airlines planes are parked at their gates at O'Hare International Airport ahead of the Thanksgiving holiday in Chicago, US – Reuters Photo

Companies benefiting from this year's economic reopening, including AMC Entertainment, United Airlines and Carnival Corp, were hammered on Friday by fears that a possibly vaccine-resistant coronavirus variant could mar their recovery.

The variant, detected in South Africa, prompted several countries to tighten border controls and investors around the globe to dump equities for safer assets.

Travel and leisure stocks bore the brunt of the selloff in the United States, with carriers United (UAL.O), Delta Air (DAL.N) and American Airlines (AAL.O) losing between 8 per cent and 10 per cent to open at their lowest levels in several months.

Hotel chains Hyatt (H.N), Marriott (MAR.O) and Hilton (HLT.N) fell between 8 per cent and 11 per cent, while cruise operators Carnival (CCL.N), Royal Caribbean (RCL.N) and Norwegian slumped about 10 per cent each. Theater chain AMC (AMC.N) sank 6.2 per cent.

Little is known of the variant but scientists say it has an unusual combination of mutations, may be able to evade immune responses and could be more transmissible.

"The economic recovery has been quite impressive and the one thing that could knock it over completely would be a more dangerous variant. Time will tell how worried we should be, but investors are selling in front of potential bad news," said Ryan Detrick, senior market strategist at LPL Financial.

The news, however, sparked a rally in last year's stay-at-home darlings such as fitness company Peloton (PTON.O), Zoom Video Communications (ZM.O), and videogame publisher Take-Two (TTWO.O).

"Investment gods have given the late-to-sell investors a second opportunity to do so because the stocks that did well in the COVID lockdown, like Peloton or Zoom, are probably going to do well once again," said Sam Stovall, chief investment strategist at CFRA Research.