by Stocks racked up further losses on Wall Street on Monday, leaving the Standard & Poor’s 500 at its lowest point in more than a year.
The sell-off came as renewed concerns about China’s economy added to global financial markets already battered by rising interest rates.
The S&P 500 fell 3.2%, deepening its losses after five straight weeks, its longest streak in more than a decade.
The Dow Jones Industrial Average fell 2% and the Nasdaq Composite fell 4.3%, as technology stocks again bore the brunt of the selloff. Monday’s sharp drop leaves the S&P 500, Wall Street’s main health measure, 16.8% below its record set earlier this year.
Wall Street’s pullback followed a worldwide swoon in markets. Stocks fell in Europe and much of Asia, as did assets including old-economy crude oil and new-economy bitcoin. Bond yields and the price of gold also fell.
Among US equities, the energy sector, a standout performer in recent weeks, accounted for some of the steepest declines due to falling oil and gas prices. Marathon Oil and APA each sank more than 14%.
“Basically, investors have a very hard time finding a place to hide,” said Sam Stovall, chief investment strategist at CFRA. “Traditional safe havens like defensive sectors or bonds are not doing as well. Raw materials are not doing well.”
The S&P 500 fell 132.10 points to 3,991.24. The Dow fell 653.67 points to close at 32,245.70. The Nasdaq slipped 521.41 points to 11,623.25.
Shares of smaller companies also fell broadly. The Russell 2000 lost 77.48 points, or 4.2%, to 1,762.08.
Most of the damage this year has been the result of the Federal Reserve’s aggressive decision not to do all it can to prop up financial markets and the economy. The central bank has already withdrawn its key short-term interest rate from its near-zero record low, where it stood for most of the pandemic. Last week, he signaled that further increases of double the usual amount could be reached in the coming months, in the hope of ending high inflation plaguing the economy.
Moves by design will slow down the economy by making it more expensive to borrow. The risk is that the Fed could cause a recession if it raises rates too high or too fast. Meanwhile, higher rates discourage investors from paying sky-high prices for investments because investors can get a better return holding super-safe Treasuries than they could just a few weeks ago.
That helped cause a roughly 29% drop for bitcoin since the start of April, for example. It fell 9.7% on Monday, according to Coindesk.
Concerns about the world’s second-largest economy added to the pessimism on Monday. Analysts cited comments over the weekend from a Chinese official who warned of a dire situation for jobs as the country hopes to stem the spread of COVID-19.
Shanghai authorities have tightened restrictions again, amid complaints from citizens that they seem endless, just as the city emerged from a month-long lockdown following an outbreak.
The fear is that China’s strict anti-COVID policies will add more disruption to world trade and supply chains, while dragging down its economy, which for years was the main engine of global growth.
In the past, Wall Street has come under similar pressure from strong earnings growth for companies.
But this most recent earnings reporting season for big US companies has generated less enthusiasm. Companies in general report higher profits than expected, as is often the case. But the discouraging signs for future growth have been abundant.
The number of companies mentioning “weak demand” on their conference calls following earnings reports jumped to the highest level since the second quarter of 2020, strategist Savita Subramanian wrote in a BofA Global Research report. Tech gains are also lagging, he said.
The tech sector is the largest in the S&P 500 by market value, giving it additional weight for market moves. Many tech companies saw their profits soar during the pandemic as people looked for new ways to work and be entertained while cooped up at home. But slower earnings growth leaves its shares vulnerable after their prices soared so high on expectations of continued earnings.
Higher interest rates engineered by the Federal Reserve are also hitting tech stocks particularly hard because they are considered some of the most expensive on the market. The Nasdaq’s 25.7% loss so far this year is much steeper than other indices.
Electric carmaker Rivian Automotive fell 20.9% on Monday as restrictions that prevented some big investors from selling their shares after their stock market debut six months ago expired. The company has lost more than three-quarters of its value so far this year.
The 10-year Treasury yield soared to its highest level since 2018 as inflation and expectations for Fed action rose. It moderated on Monday, falling to 3.03% from 3.12% on Friday by the night. But it’s still more than double where the year started.
Oil prices fell, weighing on energy stocks. Benchmark US crude fell 6.1% to $103.09 a barrel, though it is still up 40% this year. Brent crude, the international standard, fell 5.7% to $105.94 a barrel.
Associated Press journalist Yuri Kageyama contributed to this report.
