By Vivien Lou Chen and Mark DeCambre
Nasdaq ends at lowest level since June 22
U.S. stock benchmarks end lower Monday, with the Dow industrials and Nasdaq each dropping by more than 300 points, as concerns about sticker-than-expected inflation grow on rising oil prices.
How did stock benchmarks trade?
Last week was a rough one for U.S. stocks, as the S&P 500 dropped 2.2%, though the three major indexes each advanced on Friday.
On Friday, the Dow rose 483 points, or 1.43%, to 34326, the S&P 500 increased 50 points, or 1.15%, to 4357, and the Nasdaq Composite gained 118 points, or 0.82%, to 14567.
What drove the market?
A selloff for stocks deepened Monday, with markets succumbing to pressure in technology and tech-related stocks. Notably, the S&P 500's communication services sector closed 2.1% lower -- led by Facebook Inc., which experienced widespread outages across all its platforms. The technology sector fell 2.4%. Utilities and energy were the only sectors spared from the selloff.
"Investors, in my mind, are realizing or thinking through a wall of worry that includes the debt ceiling, higher oil prices and inflation, a weaker-than-expected earnings season, and a Federal Reserve that's becoming less dovish," said Lindsey Bell, chief investment strategist at Ally Invest, said via phone on Monday.
Driving inflation-based fears was U.S. oil's rally to a seven-year high, with international benchmark Brent at its highest since 2018. On Monday, the Organization of the Petroleum Exporting Countries and its allies kept their current agreement to gradually raise crude production each month, including a 400,000 barrels a day increase in November.
"Persistent inflation is becoming the stock market's bogeyman in early October," said Shawn Snyder, head of investment strategy at Citi U.S. Wealth Management. "Investors appear nervous that ongoing supply chain issues amid resilient consumer demand will lead to more lasting inflation than initially thought."Apart from inflationary pressures, discord in Washington "is increasing the tail risk that policymakers will make a mistake when addressing the debt ceiling," Snyder wrote in an e-mail to MarketWatch.
The market has been under increasing pressure, with developments centered on those in Washington, D.C., where tense negotiations on the debt ceiling are playing out and negotiations on infrastructure spending and social spending have failed to achieve a resolution. According to The Wall Street Journal, Democrats were debating whether to reduce proposed programs or cut their duration to shave down the $3.5 trillion size of the social spending proposal.
In U.S.-China relations, President Biden's top trade negotiator, U.S. Trade Rep. Katherine Tai, was quoted by the Washington Post on Monday as saying that China has failed to live up to its commitments under an agreement signed last year. "Our objective is not to inflame trade tensions with China," she said in a speech at the Center for Strategic International Studies.
The main takeaway for investors may be that the U.S.-China trade war, which intensified under former President Donald Trump, isn't going to end soon, despite a change in leadership at the White House. After a lengthy review of Beijing-Washington trade relations, the Biden administration has left in place Trump-era tariffs on Chinese imports. Senior officials also say they might take other punitive measures unless Chinese authorities respond to U.S. concerns.
In macro news, indebted Chinese property developer China Evergrande said it may sell its property management arm. Traders have been concerned that Evergrande's inability to pay debt will roil the Chinese economy, the second-largest in the world.
On the public health side, the CEO of BioNTech told the Financial Times that COVID-19 is likely to continue mutating to the point where it can escape vaccines and immune systems and that a new vaccine may be required in the future Meanwhile, Johnson & Johnson JNJ and Moderna MRNA have applied for authorization from the FDA for their COVID-19 vaccine boosters and an advisory committee will discuss them at a meeting scheduled for Oct. 14 and Oct. 15.
In economic reports, U.S. factory orders rose 1.2% in August, beating the 1.1% estimate of economists surveyed by The Wall Street Journal.October tends to be the most volatile month of the year for stocks, and the time when equities have suffered their two worst crashes in U.S. market history. Moreover, there's a non-zero chance this month that the stock market will experience a one-day crash as bad as 1987's Black Monday."We are in a difficult seasonal period and the market has been going through a personality shift, showing less of an inclination to buy the dip," said Michael Reinking, senior market strategist at the New York Stock Exchange. "The re-rating and rotation out of growth stocks -- those that are widely owned and heavily weighted within major indices -- has accelerated to the downside and is responsible for much of the damage."
Bloomberg News also reported on the trading of Fed Vice Chairman Richard Clarida, saying he traded stocks on the eve of a statement made about the pandemic. While the central bank said a February 2020 trade was a preplanned rebalancing, it puts further pressure on Fed Chairman Jerome Powell ahead of a White House decision on whether to nominate him for another term.Read: Powell's shaky hold on his Fed chair rattles markets, but a Fed face-lift is unavoidable
-Vivien Lou Chen
Which companies were in focus?
How were other assets trading?
(END) Dow Jones Newswires
October 04, 2021 16:26 ET (20:26 GMT)
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