U.S. stocks dropped from record highs amid growing anxiety that the spread of Covid-19 variants will upend growth expectations, undoing popular reflation trades. Bonds rallied.

The benchmark S&P 500 declined as much as 1.6% Thursday after setting all-time closing highs in eight of the last nine trading sessions. Economically sensitive sectors such as industrials and consumer discretionary were among the biggest declines, while financials fell the most with yields tumbling. European and Asian equity benchmarks slumped. U.S. 30-year Treasury yields fell below 1.90% for the first time since February as inflation expectations eased.

Traders are getting edgy over whether the rapid spread of the delta strain will knock back growth and prospects for central bank normalization.

“Many of the stocks got way ahead of themselves, especially in energy and financials,” said Chris Grisanti, chief equity strategist at MAI Capital Management. “Investors have to be careful to separate the economy from the stock market.”

Central bank stimulus plans remain critical to the market outlook. While the Federal Reserve mulls the timetable for tapering $120 billion in monthly bond purchases, the European Central Bank stands ready to extend ultra-loose policy. In the culmination of an 18-month review published Thursday, ECB policy makers raised their inflation target to 2% and said they would tolerate moderate overshoots.

“The Federal Reserve is confident that ruinous inflation is highly unlikely,” said George Ball, chairman of Houston-based investment firm Sanders Morris Harris. “They may be right or wrong, but they are confident that a run-up in consumer prices will fade once we have fully reoriented from the pandemic.”

Oil declined as investors await further signals from the OPEC+ alliance on production plans after a breakdown in talks. Miners contributed the most to a decline in European stocks of more than 2%.

Meanwhile, the pandemic’s global death toll has surpassed 4 million as the delta variant spreads, and the World Health Organization urged caution on reopenings worldwide.

Here are some events to watch this week:
• The Group of 20 finance ministers and central bankers meet in Venice on Friday
• China PPI and CPI data released on Friday

These are some of the main moves in markets:

• The S&P 500 fell 1.3% as of 10:01 a.m. New York time
• The Nasdaq 100 fell 1.1%
• The Dow Jones Industrial Average fell 1.1%
• The Stoxx Europe 600 fell 1.9%
• The MSCI World index fell 1.3%

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.6% to $1.1858
• The British pound fell 0.1% to $1.3785
• The Japanese yen rose 0.9% to 109.62 per dollar

• The yield on 10-year Treasuries declined four basis points to 1.27%
• Germany’s 10-year yield declined three basis points to -0.32%
• Britain’s 10-year yield declined two basis points to 0.58%

• West Texas Intermediate crude fell 0.9% to $71.58 a barrel
• Gold futures rose 0.3% to $1,807.80 an ounce

This article was provided by Bloomberg News.