Retailers have turned Black Friday, which kicks off the holiday shopping season, into a month-long event this year in the face of supply chain hiccups and a labor squeeze, with customers preferring to shop online since the pandemic began last year.
Macy's Inc shed 6%, while Kohl's Corp and Nordstrom Inc dropped about 3.5% each.
The S&P 500 slumped 0.8% as the new COVID-19 variant prompted border tightening in the European Union, Britain and other countries, and sent investors flocking to safer assets.
Little is known of the variant, detected in South Africa, Botswana and Hong Kong, but scientists say it has an unusual combination of mutations, may be able to evade immune responses and could be more transmissible.
"A state of panic around the new COVID variant is terrible news for retailers hoping people would go into their stores to snap up Black Friday deals," said Russ Mould, investment director at AJ Bell.
U.S. apparel retailers Guess Inc, American Eagle Outfitters Inc, Abercrombie & Fitch Co, Nike Inc, Gap Inc and Lululemon Athletica Inc dropped between 2% and 6.6%.
"With people getting back into physical stores and making purchases earlier in the holiday season, demand is smoothing out beyond the typical peak shopping days," said Rob Garf, vice president and general manager of retail at Salesforce.
The S&P retailing index slipped 0.2%, coming off an all-time high hit just last week.
"I wouldn't be surprised that if, at least for today, and until we get more information about this new variant, the virus would be reason to sell some retail stocks," said Sam Stovall, chief investment strategist at CFRA Research in New York.
The world's biggest e-commerce company Amazon.com edged up 0.6%.
(Reporting by Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Ramakrishnan M.)
By Medha Singh