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US STOCKS-Stocks tumble on new coronavirus variant fear

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(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window.)

* Travel, banking, energy stocks lead declines

* Pfizer hits record high

* Dow eyes worst day since October 2020 (Updates to market close, changes byline)

By Chuck Mikolajczak

NEW YORK, Nov 26 (Reuters) - U.S. stocks dropped on Friday, with the Dow and S&P 500 suffering their biggest one-day percentage drops in months, and pandemic-hit sectors that have benefited from a reopening falling sharply after a new and potentially vaccine-resistant coronavirus mutation was found.

Authorities around the world reacted with alarm on Friday to the coronavirus variant found in South Africa, with the European Union and Britain among those tightening border controls as researchers sought to establish if the mutation was vaccine-resistant.

Cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line each plunged more than 10%, while shares in United Airlines, Delta Air Lines and American Airlines also tumbled. The NYSE Arca Airline index saw its biggest one-day percentage decline in over a year.

Retailers fell as Black Friday, the start of the holiday shopping season, kicked off as the new variant fueled concerns about low store traffic and inventory issues.

Selling was broad, with big declines in all 11 major S&P sectors except healthcare, which fell slightly thanks to strong gains in COVID-19 vaccine makers Pfizer Inc and Moderna Inc.

"It is déjà vu all over again for like the eighth time," said Keith Buchanan, senior portfolio manager at Global Investments in Atlanta.

"What we understand about this variant could accelerate over the weekend, if there is more concerning news than good news, a lot of people don't want to be holding risk assets on Monday morning, or are afraid of what that could look like Monday morning."

Despite the sell-off, market participants noted the drop was likely exaggerated by the thin volume during the shortened post-Thanksgiving holiday session.

Unofficially, the Dow Jones Industrial Average fell 905.04 points, or 2.53%, to 34,899.34, the S&P 500 lost 106.74 points, or 2.27%, to 4,594.72 and the Nasdaq Composite dropped 353.57 points, or 2.23%, to 15,491.66.

The domestically focused Russell 2000 small-cap index tumbled more than 3%.

The S&P 500 banks index plummeted as investors dialed back expectations of faster U.S. interest rate hikes.

Elevated U.S. inflation, coupled with strong economic data and the renomination of Jerome Powell as the Federal Reserve chair by U.S. President Joe Biden, had fueled expectations the central bank may have to hike interest rates earlier than it had been forecasting.

The CBOE volatility index, popularly known as Wall Street's fear gauge, hit its highest level since Sept. 20.

Stocks such as Netflix Inc, Peloton Interactive and Zoom Video Communications, known as "Stay-at-home" names all saw solid advances.

(Reporting by Chuck Mikolajczak; Editing by Richard Chang)

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