Stock market today: stocks record their worst day in months on Evergrande fears


Uncertainty on several fronts allowed Wall Street to suffer its biggest losses in months amid a widespread drop in global equities.

Investors have worried about the implications and financial contagion of the potential default of Chinese real estate group Evergrande. An impending Federal Reserve policy meeting, wrangling over the budget and Congressional debt ceiling in Washington, and strained stock valuations have all contributed to a sense of uncertainty in the markets.

The


Dow Jones Industrial Average

closed 614 points, or 1.8%, on Monday after the index fell 166 points on Friday, marking three consecutive weeks of decline. The


S&P 500

lost 2.2% on Monday and the


Nasdaq Composite

fell 2.1%. It was the biggest one-day drop for the S&P and Nasdaq since May, and the biggest loss for the Dow Jones since July.

All 11 sectors of the S&P 500 closed in the red – utilities were best off with a 0.2% decline and energy stocks were the worst off, down 3.1%.


caterpillar

(ticker: CAT) and


Goldman Sachs

(GS) led the Dow Jones down by 4.5% and 3.4% respectively. Major technologies


Amazon.com

(AMZN) lost 3.1%,


Facebook

(FB) fell 2.5%, and


Apple

(AAPL) slipped 2.1%.

“Periodic setbacks are always uncomfortable because they come with bad news and uncertainty,” Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services wrote on Monday. “However, they are also the price of entry into the market. Recall that the S&P 500 has known only two more years since 1980 when it has not experienced at least an intra-annual decline of more than 5% (the deepest decline before today was only 4 % This year).

The


Cboe volatility index,

or VIX, jumped 35% Monday to more than 28 points, before falling nearly 25 points, up about 20%. The latter is the highest reading on Wall Street’s so-called fear gauge since May.

Overseas, Hong Kong


Hang Seng Index

fell 3.3%, with the Hang Seng Properties index down 6.7%. The pan-European


Stoxx 600

fell 1.7%. germany


DAX

added 10 new members including


Puma

(PUM.Germany) and


Porsche

(PAH3.Germany) on Monday, for a total of 40. The index fell 2.3%.

“The markets have been priced perfectly for a long time and in this September lull that seems to be quite seasonal throughout history, the markets are faced with what they hate most: uncertainty,” wrote David Bahnsen, chief investment officer at The Bahnsen Group, on Monday. “There is uncertainty around geopolitics, public health policy, tax laws and spending and that uncertainty has more impact when stocks are trading at 25 times earnings rather than 20 times earnings.”

Investor attention focused on China on Monday, where the seemingly imminent failure of heavily indebted property developer China Evergrande Group (3333.Hong Kong) was very important.

Global sentiment has been shaken by the Evergrande situation. The real estate giant has some $ 300 billion in liabilities, more than 6% of the total Chinese real estate sector, including debts due this week that it cannot repay in cash. The group announced on Sunday that it had started repaying some of its investors with real estate.

“The risk of contagion from the collapse of Evergrande is the main cause of today’s massive sell-off. You have all kinds of banks and insurers caught in the net, but at the end of the day I don’t see this as a moment for Lehman right now, ”said Neil Wilson, analyst at brokerage Markets.com. The bankruptcy of investment banking giant Lehman Brothers in 2008 is seen as one of the catalysts for what became the 2008-09 financial crisis.

“What we see today is how the risks are assessed gradually and then suddenly. This is certainly a major cause for concern for investors right now and it is possible that we will see further losses before the downside is finally bought, ”Wilson added.

Evergrande stock has lost more than 80% in 2021, and its dollar-denominated bonds were recently trading below 30 cents on the dollar. Analysts noted that weak liquidity – with markets closed in mainland China, Japan and South Korea for the holidays – contributed to the wider sell-off on Monday.

“While the impact of the Evergrande liquidity crisis is huge, the good news is that the fallout has not started to trickle down to other markets,” Ryan Detrick, chief markets strategist, wrote on Monday. financial resources of LPL. “Short-term finance markets have been doing very well in China so far; Remember, it was the money markets in the United States that started showing cracks in the system in early 2008, long before the wheels fell off. “

Cryptocurrencies also fell on Monday, with Bitcoin slipping more than 7% to below $ 44,000 as crypto investors were caught in overflow fears.

Meanwhile, commodities fell after Chinese Premier Li Keqiang said over the weekend that the country would work to stabilize commodity prices. China has in the past released strategic reserves of metals and oil into domestic markets in an attempt to control prices.

Continuous copper futures fell 2.7%, platinum 2.9% and palladium 5.8%. International benchmark Brent crude futures slipped 1.9% to $ 73.92 per barrel, US oil futures fell 2.3% to $ 70.29.

Meanwhile, a major decision by the US Federal Reserve is expected on Wednesday. The central bank’s monetary policy governing body, the Federal Open Market Committee, will meet on Tuesday and Wednesday before Fed Chairman Jerome Powell makes a statement. Officials will also update their projections for future interest rates and inflation.

Investors are keeping a close watch on the Fed for how and when the central bank will start slowing or reducing its monthly asset purchase schedule during the Covid-19 pandemic, which is adding liquidity to markets. Signs that tapering will come sooner rather than later could cause markets to falter even more.

“Whatever the Fed says on Wednesday, the tapering is an accommodation removal,” said Andrew Brenner, managing director of investment group NatAlliance Securities. “The Fed is between a rock and a hard place, but they squandered a window of opportunity to begin and complete the reduction and construction of a certain option.”

“It was the September correction that worried us,” Brenner said.

Here are several stocks in motion on Monday:


Evergrande

fell a further 10.2% in Hong Kong, hitting an 11-year low during the trading session, against interest on bank loans due Monday and bond coupon payments scheduled for Thursday.

Other Chinese real estate values ​​suffered in Hong Kong.


Sinic Holdings

(2103.Hong Kong) halted trading after plunging 87% as


Landscaping Henderson

(12.Hong Kong) fell 13.2%. the largest insurer in China,


Ping an

(2318.Hong Kong), down 5.8%, it is the insurance company most exposed to the real estate sector.

Shares of U.S. Covid-19 vaccine makers traded above average in volume.


Pfizer

(PFE) reversed earlier loss to close TK%, along with its German partner


BioNTech

(BNTX) down 6.5% and


Moderna

(MRNA) down 1.8%. A Food and Drug Administration advisory group voted on Friday to reject a large rollout of booster vaccines. Pfizer said Monday morning that its vaccine was safe and effective in children aged 5 to 11.

Separately, reports have indicated that the United States will allow vaccinated travelers from the European Union and the United Kingdom to enter the country from November.

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