Wall Street slips as coronavirus lockdown protests spread in China
- The S&P 500 fell 1.5 per cent, the Dow Jones Industrial Average finished 1.4 per cent lower, while the Nasdaq composite slid 1.6 per cent
- Unrest over the country’s zero-Covid policy stoked worries that a crackdown or expanded lockdowns could slow the Chinese economy
A broad slide on Wall Street left stocks lower on Monday as global financial markets reacted to protests in China calling for President Xi Jinping to step down amid growing anger over severe Covid-19 restrictions.
The S&P 500 fell 1.5 per cent, clawing back all of the benchmark index’s gains from last week. The Dow Jones Industrial Average finished 1.4 per cent lower, while the Nasdaq composite slid 1.6 per cent.
The world’s second largest economy has been stifled by a zero-Covid policy which includes lockdowns that continually threaten the global supply chain at a time when recession fears hang over economies worldwide. The recent demonstrations there are the greatest show of public dissent against the ruling Communist Party in decades.
The unrest stoked worries on Wall Street that if Xi cracks down even further on dissidents there or expands the lockdowns, it could slow the Chinese economy, which would hurt oil prices and global economic growth, said Sam Stovall, chief investment strategist at CFRA.
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“A lot of people are worried about what the fallout will be, and basically are using that as an excuse to take some recent profits,” he said.
More than 90 per cent of the stocks in the S&P 500 closed in the red, with technology companies the biggest weights on the broader market. Apple, which has seen iPhone production hit hard by lockdowns in China, fell 2.6 per cent.
Banks and industrial stocks also were among the biggest drags on the market. JPMorgan fell 1.7 per cent and Boeing slid 3.7 per cent.
Several casino operators gained ground as the Chinese gambling haven of Macau tentatively renewed the their licences. Las Vegas Sands rose 1.1 per cent and Wynn Resorts gained 4.4 per cent.
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The fallout from the collapse of cryptocurrency exchange FTX continued. Cryptocurrency lender BlockFi is filing for Chapter 11 bankruptcy protection. Cryptocurrency exchange Coinbase Global fell 4 per cent and the price of bitcoin slipped 2.1 per cent.
All told, the S&P 500 fell 62.18 points to 3,963.94. The Dow dropped 497.57 points to 33,849.46. The tech-heavy Nasdaq lost 176.86 points to close at 11,049.50.
Smaller company stocks fell even more that the broader market. The Russell 2000 slid 38.23 points, or 2.1 per cent, to 1,830.96.
Markets in Asia and Europe fell. The yield on the 10-year Treasury held steady at 3.69 per cent.
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Wall Street is coming off of a holiday-shortened week that was relatively light on corporate news and economic data. Investors have a busier week ahead as they continue monitoring the hottest inflation in decades and its impact on consumers, business and monetary policy.
Anxiety remains high over the ability of the Federal Reserve to tame inflation by raising interest rates without going too far and causing a recession. The central bank’s benchmark rate currently stands at 3.75 per cent to 4 per cent, up from close to zero in March. It has warned it may have to ultimately raise rates to previously unanticipated levels to rein in high prices on everything from food to clothing.
Federal Reserve Chair Jerome Powell will speak at the Brookings Institution about the outlook for the US economy and the labour market on Wednesday.
The Conference Board will release its consumer confidence index for November on Tuesday. That could shed more light on how consumers have been holding up amid high prices and how they plan on spending through the holiday shopping season and into 2023.
The government will release several reports about the labour market this week that could give Wall Street more insight into one of the strongest sectors of the economy. A report about job openings and labour turnover for October will be released on Wednesday, followed by a weekly unemployment claims report on Thursday. The closely watched monthly report on the job market will be released on Friday.
