And finally, Wall Street has racked up one of its worst days of 2021, with the S&P 500 recording its biggest fall in around four months.
Despite a late, limited rebound off its lows, it’s been a rough day on the New York Stock Exchange.
Worries that China’s indebted property group Evergrande could default on a debt payment later this week hit stocks…. as did anxiety over the ongoing pandemic, and the possibility of the Federal Reserve tapering its bond-buying stimulus programme soon.
As the dust settles, the Dow Jones industrial average has ended the day down 614 points, or 1.78% at 33,970 points. That’s its biggest one-day fall in two months. Caterpillar ended as the top faller (-4.4%), followed by Goldman Sachs (-3.4%) and JP Morgan (-3%).
The S&P 500 index, which covers a broader range of stocks, has shed 1.7% or 75 points to finish at 4,357. That’s it’s biggest fall since May, and its lowest close since July.
And the tech-focused Nasdaq had a more bruising day, down 2.2% or 330 points at 14,714 points. That’s its lowest level in a month, with major tech names such as Microsoft, Alphabet, Amazon, Apple, Facebook and Tesla all falling.
CNBC has cited five reasons for the selloff:
- Investors fear a contagion sweeping financial markets from the troubled China property market. Hong Kong equities saw a big sell-off during the Asia trading session on Monday. The benchmark Hang Seng index plunged 4% with embattled developer China Evergrande Group on the brink of default.
- The Federal Reserve begins a two-day meeting Tuesday and investors are worried the central bank will signal it’s ready to start pulling away monetary stimulus amid surging inflation and improvement in the job market.
- Covid cases because of the delta variant remain at January levels as colder weather approaches in North America.
- September has the worst track record of any month, averaging a 0.4% decline, according to the Stock Trader’s Almanac. History shows the selling tends to pick up in the back half of the month.
- Investors are also concerned about brinkmanship in DC as the deadline to raise the debt ceiling approaches. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown.
Lots to ponder then…. And on that note, goodnight! GW
The S&P 500’s worst drop in six months on Monday is an opportunity to buy stocks as the global economic recovery is poised to pick up momentum, according to JPMorgan Chase & Co. strategists led by Marko Kolanovic.
“The market sell-off that escalated overnight we believe is primarily driven by technical selling flows (CTAs and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks,” the strategists wrote in a client note.
“Our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip.”
Caveat emptor, remember… More here.
After a very volatile day in the markets, here are today’s main stories:
Warnings about the CO2 shortages escalated, with food producers warning that we could soon see shortages:
While in the energy sector…. worries about the crisis continued to mount as gas prices kept rising:
And in other news….
The last hour of NYSE trading is looking pretty choppy….
The New York stock market is an ocean of red this afternoon — with losses across the board.
Enhertu reduced the risk of disease progression or death by 72% in patients with HER2-positive metastatic breast cancer, AZ said, showing “a strong trend towards improved overall survival.”
So despite the wider market tumble, AstraZeneca’s shares are up 4% – one of the few green stocks today:
Ouch – with just over an hour to go, Wall Street is hitting new lows for the day.
The Dow has now shed around 900 points, a fall of 2.6%, taking the index back down to 33,683 points.
Ed Moya of OANDA says we’re seeing the first ‘meaningful’ pullback in months, due to a series of bearish events – including the Evergrande crisis.
US stocks are selling off sharply as seasonal factors have allowed the Evergrande story to help deliver the first meaningful pullback since February. It just seems all the headlines to start the trading week are bearish; Evergrande’s debt fears and contagion, Chip shortage issues persist, PM Johnson is going after Amazon’s taxes, lackluster IPO performance after another record year, and as some Fed officials have begun to sell their stock amid ethics concerns. (earlier this month Fed’s Kaplan and Rosengren said they will sell all their individual stock holdings by September 30th).
The Evergrande crisis and fears of a credit squeeze was enough to weigh on sentiment. Market contagion in Asia is happening as excessive risk taking in China has always been the story. Letting Evergrande fail would send the market the right signal that China is serious about controlling debt, but Beijing will likely support whatever is necessary to avoid sending shock waves through their financial system.
The democratic senator from West Virginia threw a curve ball for the Biden administration in thinking Congress should take a “strategic pause” until 2022 before delivering on the spending bill which could derail everything else. This might just be posturing but it does raise the risk that investors may have been a little too optimistic in expecting infrastructure and ~$2 trillion spending package.
Here’s a good thread on how the Evergrande crisis may play out, and on the underlying problems….from China expert Patrick Chovanec, an economic advisor, and part-time professor at Columbia University’s School of International and Public Affairs.
On today’s market moves..
This is handy:
Oof. The Dow Jones industrial average has now shipped over 800 points today.
The index has now slumped by 2.34% to 33,774 points, on track for its worst day since last October.
Each of the 30 stocks on the index are in the red, with Caterpillar still the worst performer (-5.1%) as worries over the global economy rise.
China-focused stocks are among the big fallers in New York.
Online grocery giant Pinduoduo has slumped 7.2%, with e-commerce group JD.com down 5.5% and internet company Baidu losing 5.4%.
That suggests that concerns about the risk of contagion from the Evergrande crisis is one factor in today’s fall.
But…every sector is down today, from energy (-4%) and financials (-3.2%) to real estate (-0.9%) and utilities (-0.15%).
And there are are plenty of other worries, as Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia, puts it (via Reuters).
“The Evergrande situation, although big and impactful, isn’t the reason for this selloff,”
“Rather, stalemates in Congress on the debt ceiling, worries on policy changes or mistakes in monetary policy, and a litany of proposed tax increases have dampened the mood for investors. When this occurs, corrections happen.”
Back in New York, shares are falling deeper into the red.
The Dow Jones industrial average is now down 696 points, or 2%, at 33,888 points.
The S&P 500 index has also lost around 2%, while tech stock are being pummelled – the Nasdaq has lost over 2.5% today.
The unfolding Evergrande crisis is creating jitters on Wall Street, as the debt-laden Chinese property developer faces a debt repayment deadline later this week (reminder, its shares hit a decade low today).
Concerns that the Fed could announce a possible reining in of support later this week are also jolting markets.
Fiona Cincotta, Senior Financial Markets Analyst at City Index, explains:
The Fed rate announcement in due on Wednesday and expectations are growing the US central bank will start laying out the groundwork for a tapering of bond purchases, potentially tee-ing up for a November kick off. However, the preparation to withdraw support and taper bond purchases comes as concerns grow over the health of the global economic recovery.
Fears of contagion from the unfolding Evergrande crisis in China is hitting risk sentiment. Investors are taking risk off the table ahead of a likely default by China’s second largest real estate developers later in the week and what the wider implications for the financial market could be. Fears are being played out in the commodities market where iron ore futures extended losses as steel demand is expected to weaken.