Dow slips 700 points as Chinese Evergrande implosion shakes U.S. stock investors
US stocks were down sharply at noon Monday, trading near session lows, as investors analyzed the potential impact of a real estate developer’s collapse in China and traders positioned ahead of a meeting day of Federal Reserve policymakers which begins Tuesday.
How are equity futures traded?
The Dow Jones Industrial Average DJIA,
fell 713 points, or 2.1%, to 33,868.
The S&P 500 SPX,
fell 94 points, or 2.1%, to 4,337.
The Nasdaq COMP Composite Index,
fell 2.7%, or 403 points, to 14,641.
The Dow recorded its third consecutive weekly decline on Friday, losing 0.1% and recording its longest weekly losing streak since the four weeks ending September 25, 2020, according to Dow Jones Market Data. The S&P 500 fell 0.6% in a second straight week of losses, while the Nasdaq Composite fell 0.5%, also recording two consecutive weekly declines, according to FactSet.
What drives the market?
Is this the correction that some strategists have anticipated?
A downturn in the Chinese real estate market, which suffered heavy losses on Monday with shares of China Evergrande 3333,
down 13% in Hong Kong, were blamed for pulling down US and global equities.
Markets have been closed in mainland China for a holiday, but the Hang Seng HSI,
fell more than 3%.
Read: Evergrande fears are driving the stock market down: here’s what investors need to know about the Chinese real estate giant
“There are a lot of headlines to hit stocks, and we’ve seen that happen,” said Sahak Manuelian, head of equity operations at Wedbush Securities in Los Angeles, highlighting Evergande’s woes, geopolitical tensions, the next FOMC meeting and nervousness about the United States. debt ceiling.
“I don’t know what the scope of this will be,” Manuelian told MarketWatch, but he also said he would watch whether investors come out in force over the next few days to buy oppressed stocks, as has been widely reported. the case. been the case for any weakness since the start of the year. “We’ll see how we get out of this. “
The 8.25% Evergrande bond with interest due this week was trading at around 29 cents to the dollar on Monday, according to Reuters.
An S&P Global Ratings report released on Monday said that an Evergrande default would lead neither to a tidal wave of defaults nor to simple ripples of a pebble in a pond, but something in between.
The events could seriously undermine investor confidence in China’s real estate sector and in speculative-grade markets in general, potentially reducing access to financing for independent names, ”said Matthew Chow, credit analyst at S&P Global Ratings.
Meanwhile, investors will closely monitor any discussion of spending cuts at the Fed’s two-day policy meeting. The Fed has said it will start cutting its bond purchases before the end of the year, but the exact timing of that move remains open to speculation.
To verify: Evergrande isn’t the only reason the stock market is heading for its worst day in 2 months. Here are 5 other reasons
However, the economy has sent mixed signals, amid the increase in coronavirus cases due to the delta variant. Friday’s losses for Wall Street came as consumer sentiment was near a roughly 10-year low.
Analysts were also discussing Congress’ inability so far to raise the debt ceiling.
“While today’s sell-off may be alarming for some, it was really about when a pullback would occur and not if – especially since September is a notoriously volatile month for stocks,” wrote Chris Larkin, Managing Director of E-Trade Financial, in remarks emailed.
Investors were also weighing an optimistic report from Pfizer Inc. PFE,
and the German partner BioNTech SE BNTX,
Monday, reporting positive results in a Phase 2/3 trial of their COVID-19 vaccine in children aged 5 to 11, and said the vaccine was safe, well tolerated and produced a “robust neutralizing antibody response “.
In business news, the National Association of Home Builders’ monthly confidence index rose one point to 76 in September, the professional group said on Monday. The slight increase comes after a three-month drop in optimism among home builders.
Which companies are targeted
- Twitter Inc. TWTR, -2.61% announced Monday that it had reached an agreement to settle a class action lawsuit that began in 2016.
The actions of electric vehicle manufacturers based in China and Tesla Inc. TSLA, -2.97%, traded lower on Monday, in the middle Li Auto Inc.warning of a lack of delivery and the actions of NIO inc. NIO fell 6.2% to a four-month low.
- GameStop Corp. GME on Monday announced plans to hire 500 employees at its new customer service center in Pembroke Pines, Florida. Shares fell 5.7%
The airline industry has fallen, but outperformed amid a massive sell-off in the market, after reports that President Joe Biden will soon lift the travel ban on Europeans, which was put in place at the start of the COVID-19 pandemic. Negotiated exchange J US Global Jets ETFsETS slipped 0.8%.
Financial stocks slipped due to the nervousness of the markets highlighted by Evergrande, with Berkshire Hathaway BRK. A, JPMorgan Chase JPM, Bank of America BAC, Wells fargo WFC, Morgan stanley MRS, Citigroup VS, Goldman Sachs GS, and Black rock BLK all abruptly. The SPDR Financial Selection Fund
was down 3.2%, outpacing the decline in the S&P 500.
How are the other assets doing?
The yield on the 10-year TMUBMUSD10Y T-bill fell 6 basis points to around 1.32%. The yields and prices of debt move in opposite directions.
The ICE US Dollar Index DXY, a measure of the currency against a basket of six major rivals, was trading less than 0.1% higher at 93.23, after a weekly gain of 0.7% on Friday .
Oil futures fell on Monday, with the US benchmark CL00 trading down 2.1% to $ 70.49 a barrel. GC00 gold futures rose 0.6% to trade at $ 1,761.50 an ounce.
On European equities, the Stoxx Europe 600 SXXP index fell 1.7%. The FTSE 100 UKX fell 0.9%.
A number of Asian markets have been closed for holidays, notably in China where the Shanghai Composite SHCOMP. However, Hong Kong’s Hang Seng HSI index was down 3.3%, after falling 4.9% last week. The Japanese market has also been closed.
Barbara Kollmeyer contributed reporting