US stocks have worst day in nearly three weeks as Fed talks hawkish, China worries rattle markets

U.S. stocks suffered their worst day in nearly three weeks on Monday as protests in China raised risks to global growth and Federal Reserve officials said more interest rate hikes would be needed to curb inflation.

How stocks are traded
  • The Dow Jones Industrial Average

    ended down 497.57 points, or 1.5%, at 33,849.46, not far from the session low.

  • S&P 500

    ended down 62.18 points, or 1.5%, at 3,963.94.

  • The Nasdaq Composite

    closed down 176.86 points, or 1.6%, at 11,049.50.

Monday’s declines were the biggest for all three indexes since Nov. 9, according to Dow Jones market data. US stocks posted weekly gains last week for the second time in three weeks. The Dow rose 1.8%, the S&P 500 advanced 1.5% and the Nasdaq gained 0.7%.

What drives the markets

Wall Street started the week in a dour mood as traders absorbed the impact of unrest in China and weighed in on Monday’s interest rate comments from two Fed officials.

President of the Federal Reserve of St. Louis James Bullard told MarketWatch that it favors more aggressive rate hikes to curb inflation and that the central bank will likely need to keep rates above 5% in 2024. Meanwhile, John Williamspresident of the New York Federal Reserve, said U.S. unemployment could rise to 5 percent next year, up from October’s level of 3.7 percent, in response to a series of interest rate hikes by the central bank.

Overseas, the Hang Seng index in Hong Kong

closed up 1.6% and most Asian stock indexes also fell, except for India, on fears of unrest in China. Those concerns spilled over into commodity markets, where West Texas Intermediate crude for January delivery

it briefly fell below $74 a barrel before recovering and settled at $77.24 per barrel on the New York Mercantile Exchange. Meanwhile, copper prices HG00 fell 1% to $3.59 a pound.

“What people are worried about is the potential for the protests to spread in China and whether the population is reaching its breaking point,” said Derek Tang, an economist at Monetary Policy Analytics in Washington. “At the same time, the Fed’s talk is intensifying and the message is that more hikes are to come. So investors are not getting any relief.”

Signs that economic activity in China will continue to be disrupted by the protests or further COVID measures are likely to continue to weigh on commodity prices, analysts said. Meanwhile, concerns about global growth helped support government bond markets earlier on Monday, when the 10-year bond yield

it briefly traded at its lowest level since October.

The unprecedented waves of protest in China “have sent waves of anxiety across financial markets as concerns mount about the implications for the world’s second-largest economy,” said Suzanne Streeter, senior investment and market analyst at Hargreaves Lansdown.

“As demonstrations spread across the country from Beijing to Xinjiang and Shanghai, reflecting growing anger over the zero-Covid policy, a sustained recovery in demand in the vast country looks even further away.”

But the news wasn’t all bad: reports of strong online black friday sales helped increase the stock of Inc.
which finished with almost 0.7%.

Investors can expect more information on the health of the US economy in what is shaping up to be a busy week for US economic data: Later this week, investors will get the ADP employment report, followed by the November jobs report. Revised third-quarter gross domestic product data is expected on Wednesday, along with the Fed’s beige book report. Federal Reserve Chairman Jerome Powell will speak publicly on Wednesday, and the closely watched inflation gauge is due on Thursday.

Read: “We see major stock markets down 25% from levels just above today’s,” says Deutsche Bank

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Jamie Chisholm contributed to this article.

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