Chinese COVID unrest slices into stocks
A broad slide on Wall Street left stocks lower 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 percent, clawing back all of the benchmark index’s gains from last week. The Dow Jones Industrial Average finished 1.4 percent lower, while the Nasdaq composite slid 1.6 percent.
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.
“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 percent of the stocks in the S&P 500 closed in the red, with technology companies the biggest weights on the broader market.
Banks and industrial stocks also were among the biggest drags on the market. JPMorgan fell 1.7 percent and Boeing slid 3.7 percent.
Several casino operators gained ground as the Chinese gambling haven of Macao tentatively renewed the their licenses.
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 percent to 4 percent, 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.
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.