Wall Street’s losses deepen as global markets tumble

NEW YORK — Stocks on Wall Street fell more Monday, with the S&P 500 at its lowest point in more than a year.

The sell-off came amid renewed concerns about the Chinese economy, while global financial markets have been hit by rising interest rates.

The S&P 500 fell 3.2%, falling further after a fifth straight weekly loss, its longest losing streak in more than a decade.

The Dow Jones Industrial Average fell 2% and the Nasdaq retreated 4.3% as tech stocks took another hit from the sell-off. Monday’s sharp drop sent the S&P 500, Wall Street’s main measure of health, down 16.8% from a record set earlier this year.

The sell-off on Wall Street comes after a slump in global markets. Not only stocks in Europe and much of Asia fell, but everything from old-economy crude oil to new-economy bitcoin. Bond yields and gold prices also fell.

Among U.S. stocks, the energy sector, which has outperformed in recent weeks, fell the most as energy prices fell. Marathon Oil and APA Corp. both fell more than 14 percent.

“Basically, investors are finding it difficult to find hiding places,” said Sam Stovall, chief investment strategist at CFRA. “Traditional safe-haven assets, such as defensive sectors or bonds, underperformed. Commodities underperformed.”

The S&P 500 fell 132.10 to 3,991.24. The Dow fell 653.67 points to 32,245.70. The Nasdaq lost 521.41 points to 11,623.25.

Shares of smaller companies were also broadly lower. The Russell 2000 fell 77.48 points, or 4.2 percent, to 1,762.08.

Much of this year’s losses are the result of the Fed’s aggressive abandonment of doing what it can to support financial markets and the economy. The central bank has pulled its key short-term interest rate from an all-time low near zero, where it has been during nearly all of the pandemic. Last week, it hinted that the normal amount could be tripled in the coming months in a bid to undo the high inflation that has engulfed the economy.

These deliberate moves will slow the economy by raising borrowing costs. The risk is that if the Fed moves too fast or too fast, it could lead to a recession. At the same time, higher interest rates prevent investors from paying very high prices for their investments because investors can get more than ever from owning super-safe Treasury bonds.

This, for example, has caused Bitcoin to drop roughly 29% since the start of April. It fell 9.7% on Monday, according to data from Coindesk. Concerns about the world’s second-largest economy added to the gloom on Monday. Analysts cited comments made by a Chinese official over the weekend warning of a dire employment situation as the country looks to stem the spread of COVID-19.

Shanghai authorities tightened restrictions again, and citizens complained that it felt endless, as if the city had just emerged from a month-long strict lockdown in the wake of the outbreak.

The worry is that China’s strict anti-coronavirus policies will cause more disruption to global trade and supply chains, while dragging down its economy that has been a major driver of global growth for years.

In the past, Wall Street has held steady despite similar pressures due to strong corporate profit growth.

But the most recent earnings season for major U.S. companies has been less enthusiastic. As is usually the case, companies overall reported higher-than-expected profits for the latest quarter. But there are plenty of gloomy signs for future growth.

The number of companies calling “soft demand” on a post-earnings call jumped to the highest level since the second quarter of 2020, strategist Savita Subramanian wrote in a Bank of America Global Research note. Earnings from tech companies are also lagging, she said.

The technology sector is the largest sector in the S&P 500 by market capitalization, giving it additional weighting to its market moves. Many tech-oriented companies have seen their profits rise amid the pandemic as people find new ways to work and play from home. But with their prices soaring on expectations of continued gains, slowing profit growth has made their shares vulnerable.

Higher interest rates designed by the Fed have also hit their stock prices particularly hard, as they are seen as some of the most expensive in the market. So far, the Nasdaq Composite is down 25.7% in 2022, much more than the rest of the index.

Electric car maker Rivian Automotive fell 20.9% on Monday as restrictions expired, preventing some big investors from selling its shares after going public six months ago. It has lost more than three-quarters of its value so far this year.

The 10-year U.S. Treasury yield has risen to its highest level since 2018 as inflation and expectations for Fed action rise. It eased on Monday, to 3.03% from 3.12% late Friday. But it’s still more than double what it was at the start of the year.

Oil prices fell, weighing on energy stocks. Benchmark U.S. crude fell 6.1 percent to settle at $103.09 a barrel, but is still up about 40 percent this year. Brent crude, the international standard, fell 5.7% to settle at $105.94 a barrel.

Associated Press business writer Yuri Kageyama contributed. Vega reported from Los Angeles.

Copyright © 2022 The Washington Times, LLC.

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