US stocks plunged in global markets after South Africa reported the discovery of a new Covid-19 variant. Many are concerned that this would trigger new outbreaks and undermine the already fragile economic recovery. Safe haven assets, on the other hand, soared amid the news.

This is the worst post-Thanksgiving reading for the S&P 500 since 1941 as it saw a 2.68% decline. The Nasdaq 100 also closed at its lowest level in two weeks, dropping by 0.82%. It was the travel and leisure stocks that fell, while home-based stocks rallied.

Treasury bonds also jumped, reducing the 10-year yield by the most since March 2020. Traders also stopped betting on an early rate hike, which led to the decline of dollar.

Although the World Health Organization and scientists in South Africa said they are working "at lightning speed" to find out how quickly variant B.1.1.529 can spread and whether it is resistant to vaccines, this new threat adds pressure to investors that are already grappling with problems in the form of higher inflation, tighter monetary policy and slower economic growth.

"This is not trivial, so it makes sense for people to rebalance because there's tons of uncertainty and that's never good for buying stocks," said Jay Hatfield, founder and CEO of Infrastructure Capital Management.

Meanwhile, Ipek Ozkardeskaya, a senior analyst at Swissquote, said: "This is dire news. The new COVID variant could hit the economic recovery, but this time, the central banks won't have enough margin to act. They can't fight inflation and boost growth at the same time. They have to choose. "

The sell-off followed the month-long rally in stocks, which occurred even though inflation was high and growth was slower than anticipated. Back then, investors poured nearly $ 900 billion in exchange-traded and long-term equity funds, surpassing the cumulative figure for the past 19 years.

Brian Wendig, President of MJP Wealth Advisors, said: "With such estimates, any sort of headline is going to cause a pullback. You definitely don't want to be 100% in risk assets, whether it's interest rate risk, inflation risk, policy risk and now another cue for the health-care crisis letting us all know we're not out of the pandemic. "

Traders also pushed back the expected timing of the first rate hike by the Federal Reserve to September, while briefly assessing any further increases until 2023. Meanwhile, the rally in Treasury bonds brought the 10-year yield down 16 basis points to about 1.47%, the largest single-session decline since March 2020.

They are also betting that the Bank of England will raise rates by less than 10 basis points next month, and urged the European Central Bank to move rates by seven basis points in December 2022.

But even though selling was unabated, it is important not to get carried away by short-term fluctuations.

Grace Capital President Cate Faddis said: "We must not forget the backdrop that this was a market that was headed towards another 25% year. A 2% move is not very significant in light of the year we have had."