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Wall Street’s main indexes fell sharply on Thursday as the spread of the COVID-19 Delta variant cast doubts over an economic recovery, while a rout in Chinese tech stocks appeared to have spilled across markets.

Investors globally turned wary of risk. Equities fell and bond prices rallied on worries about Beijing’s crackdown on foreign-listed Chinese firms and a sustained global economic recovery.

Chinese ride-hailing giant Didi Global Inc, which has been at the center of a selloff after its app was taken down by Beijing, fell 6 per cent.

Other U.S.-listed Chinese stocks fell, tracking steep losses in China and Hong Kong, with e-commerce giant Alibaba Group Holding Ltd sliding 3.9 per cent and internet search engine Baidu Inc down 3.8 per cent.

“What you saw with Didi this week really spooked investors because you have a concern now…that we don’t know what the regulatory proposals are going to look like,” said Thomas Hayes, chairman of Great Hill Capital LLC in New York.

“Until there’s clarity and the Chinese government moderates its stance, investors will dump holdings and ask questions later.”

Meanwhile, Atlanta Federal Reserve President Raphael Bostic warned that a spike in the highly infectious coronavirus variant could hamper a U.S. economic recovery.

Minutes of the central bank’s June meeting released on Wednesday showed the Fed officials felt a U.S. recovery had a long way to go and they may not be ready yet to move on tightening policy.

Indeed, the Labor department’s report showed weekly jobless claims unexpectedly rose to 373,000 for the week ended July 3. Economists polled by Reuters had forecast 350,000 applications for the latest week.

The CBOE Volatility index, also known as Wall Street‘s fear gauge, jumped 3.1 points to its highest level in over two weeks.

Stocks that led much of Wall Street’s rally this year and those that stand to benefit the most from an economic rebound were under pressure.

The S&P 500 banks sank 2.6 per cent, tracking a fall in the 10-year Treasury yield to 1.25 per cent.

All the 11 major S&P 500 sector indexes were in the red, with cyclical players such as energy and industrials tumbling along with growth sectors including consumer discretionary and technology.

The FAANG group of shares, which are typically preferred during a low-rate environment dropped between 0.3 per cent and 2.1 per cent. They had sent the Nasdaq and S&P 500 to record highs in the previous session.

At 10:03 a.m. ET, the Dow Jones Industrial Average was down 392.30 points, or 1.13 per cent, at 34,289.49, the S&P 500 was down 56.93 points, or 1.31 per cent, at 4,301.20 and the Nasdaq Composite was down 211.24 points, or 1.44 per cent, at 14,453.83.

Tesla Inc declined 2.1 per cent after the electric-vehicle maker said it sold fewer China-made vehicles in June compared with May.

Investors also awaited the start of second-quarter earnings, with big lenders kicking off the season next week.

Declining issues outnumbered advancers for a 8.09-to-1 ratio on the NYSE and for a 6.20-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and no new low, while the Nasdaq recorded 13 new highs and 133 new lows.