GLOBAL MARKETS-COVID-19 surge drives down shares and bond yields; oil plunges

* Dow and S&P 500 sink more than 2%

* Dollar rises broadly

* Oil prices fall 6% after OPEC+ resolves spat

* Government bond yields burrow lower amid COVID infection
jump

By Jessica DiNapoli

NEW YORK, July 19 (Reuters) - Stocks on Wall Street fell
around 2% on Monday, as a rise in worldwide coronavirus cases
and deaths drove investors away from risky assets, crushing bond
yields and share prices.

Oil prices plunged around 6%, driven down both by worries
about future demand and by an OPEC+ agreement to increase
supply.

New COVID-19 cases rose in England and Asia, with U.S.
infections soaring 70% last week, dampening optimism on the
economic recovery. The 10-year yield fell 9.2 basis
points to 1.207%, a low last seen in February, while the S&P 500
fell for a third straight session.

"Fears over peak economic data and a resurgence in COVID
cases has the market on edge today," said Ryan Detrick, Chief
Market Strategist for LPL Financial, in an emailed statement.
"Of course, don't forget that the S&P 500 hasn't had a 5%
correction since October, so you could say we are more than due
for some turbulence."

The Dow Jones Industrial Average dropped more than
2.5% mid-afternoon on Monday, with the S&P 500 falling
just shy of 2%. The Nasdaq Composite fell 1.4%.

MSCI's all-country world index, a gauge of
global shares, was down nearly 2%.

Investors are also worried about the specter of elevated
inflation, which the market has long feared.

U.S. President Joe Biden on Monday acknowledged that prices
for some items such as vehicles have increased but said that his
administration would remain vigiliant over inflation and havoc
it could wreak on the economy.

"Fear of stagflation will be a major concern for investors
if a resurgence in COVID infections causes economies to slow
while consumer prices continue an upward trajectory," said Peter
Essele, head of investment management for Commonwealth Financial
Network, in an e-mailed statement.

U.S. deaths from the coronavirus, spurred by the dominant
Delta variant, are up 26%, with outbreaks occurring in parts of
the country with low vaccination rates. About one in five new
cases are in Florida, and the vast majority of people
hospitalized for COVID are unvaccinated.

"The big concern for the market is whether we are going to
see a slowdown in the global economic recovery, and this could
be the overriding force which results in a bad period for
equities in the weeks ahead," said Russ Mould, investment
director at brokerage AJ Bell.

On Wall Street, value stocks, including financials,
industrials, materials and energy
dropped between 2.5% and 4.5%.

The greenback climbed to a more than three-month peak
against a basket of major currencies. But the dollar is off
highs as the yen and Swiss franc advanced with the decline in
risk appetite.

FOREVER CHANGED?

Oil prices fell as OPEC+ agreed to boost output, causing
concerns about a crude surplus. The decline was the
largest since late March.

Brent crude was down $4.23, or 5.8%, at $69.36 a
barrel late morning. U.S. oil was down $4.56, or 6.4%, at
$67.25 a barrel.

Economists at Bank of America downgraded their forecast for
U.S. economic growth this year to 6.5%, from 7% previously.

"Despite rising vaccination rates, a return to pre-Corona
normality seems questionable," Ulrich Leuchtmann, head of FX and
commodity research at Commerzbank, wrote in a research note.

(Reporting by Jessica DiNapoli in New York; additional
reporting by Marc Jones and Karin Strohecker
Editing by Edmund Blair, Timothy Heritage, Dan Grebler, Peter
Graff)