US Stocks Have Worst Day in Nearly Three Weeks as Fed Speaks Hawkish, China Concerns Shake Markets

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

How the shares traded
  • The Dow Jones Industrial Average DJIA,
    -1.45%
    it finished down 497.57 points, or 1.5%, at 33,849.46, not far from the session low.

  • The S&P 500 SPX index,
    -1.54%
    it closed down 62.18 points, or 1.5%, at 3,963.94.

  • The Nasdaq Composite COMP,
    -1.58%
    it closed down 176.86 points, or 1.6%, at 11,049.50.

Monday’s declines were the largest for all three indices 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 was up 1.8%, the S&P 500 was up 1.5% and the Nasdaq gained 0.7%.

What drove the markets

Wall Street started the week in a downbeat mood as traders absorbed the impact of the unrest in China and valued interest rate commentary from a pair of Fed officials on Monday.

St. Louis Fed Chairman James Bullard told MarketWatch that he favors more aggressive interest rate hikes to contain inflation and that the central bank will likely need to keep interest rates above 5% in 2024 Meanwhile, John Williams, chairman of the New York Fed, said US unemployment could rise to 5% next year, up from 3.7% in October, in response to the series of hikes. of central bank rates.

Overseas, HSI of the Hong Kong Hang Seng Index,
-1.57%
it finished down 1.6% and most Asian stock indexes were also down, except India, on fears over unrest in China. Those concerns have also extended to commodity markets, where West Texas Intermediate crude for January delivery CLF23,
+0.34%
it briefly fell below $74 a barrel before recovering and stabilizing at $77.24 a barrel on the New York Mercantile Exchange. Meanwhile, HG00 copper prices fell 1% to $3.59 per pound.

“What people are concerned about is how much protests have 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, Fed talk is picking up and the message is that there are more hikes to come. So investors are not finding relief.”

Signs that economic activity in China will continue to be disrupted by protests or more anti-COVID measures will likely continue to weigh on commodity prices, analysts said. Meanwhile, global growth concerns helped buoy government bond markets on Monday as the yield on the 10-year note TMUBMUSD10Y,
3.684%
traded briefly at its lowest level since October.

The unprecedented waves of protests in China “have caused ripples of unease in financial markets, as worries mount about the repercussions for the world’s second-largest economy,” said Susannah Streeter, senior investment and markets 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 across the vast country looks even further away.”

But the news wasn’t all bad: Reports of strong online Black Friday sales helped boost shares of Amazon.com Inc.
AMZN,
+0.58%,
which closed up 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 receive the ADP jobs report followed by the November jobs report. Revised third-quarter gross domestic product data is due on Wednesday, along with the Fed’s Beige Book report. Federal Reserve Chairman Jerome Powell is due to speak publicly on Wednesday, and a closely monitored inflation measurement is expected on Thursday.

Laws: “We see major stock markets plunge 25% from slightly above today’s levels,” says Deutsche Bank

Single Title Movements
  • Shares of The Apple company.
    AAPL,
    -2.63%
    finished down 2.6% amid reports of a drop in production of as many as 6 million iPhone Pros.

  • Activision Blizzard Inc.
    ATVs,
    +1.70%
    Shares closed up 1.7% as Wall Street analysts said the stock looked undervalued even though Microsoft Corp.
    MSFT,
    -2.32%
    does not receive authorization for its acquisition.

  • Class A shares of DraftKings Inc.
    DKNG,
    -4.23%
    closed by 4.2% after JPMorgan analyst Joseph Greff turned bearish on the online sports betting and fantasy sports firm.

  • Shares of some of China’s biggest tech companies rallied on Monday despite domestic turmoil. Shares of Alibaba group
    BABA,
    +0.50%
    closed up 0.5%, while the KraneShares CSI China Internet ETF
    KWEB,
    +3.92%
    it closed up 3.9%. Shares of Pinduoduo Inc.
    PDD,
    +12.62%
    closed more than 12.5% ​​higher after the company posted impressive gains, helping to lead the broader rally among the company’s US-listed peers.

Jamie Chisholm contributed to this article.

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