Rising US stocks take a breather as China raises concerns about global growth

Weak data from China sent US stocks lower on Monday, with investors pausing for breath after extending last week’s rebound from mid-June lows.

How are shares traded?
  • Dow Jones Industrial Average DJIA,
    + 0.39%
    It fell 71 points, or 0.2%, to 33,690 points.

  • S&P 500 SPX Index,
    + 0.25%
    It fell 17 points, or 0.4%, to 4,264.

  • Nasdaq Composite,
    + 0.38%
    It lost 46 pips or 0.4% to trade at 13,002.

The S&P 500 advanced 3.3% last week, its fourth consecutive weekly gain and the longest winning streak since November. The Dow Jones rose 2.9% last week, while the Nasdaq Composite rose 3.1%.

What is driving the markets

Disappointing economic news from China helped set the negative tone, with retail sales, investment, and industrial production slowing and expectations lost. China’s central bank reduce the lending rates.

“Bad data from China weighs on recession fears for the rest of the world,” Ipek Ozkardskaya, chief analyst at Swissquote Bank, said in a note.

Also, the Federal Reserve Bank of New York’s Empire State Business Conditions Index, a measure of manufacturing activity in the state, dropped 42.4 points to minus 31.3 in August, the regional Fed said on Monday.

That number didn’t help sentiment, although economists were approaching the matter with caution.

Note: Oren Klashkin, chief US economist at Oxford Economics, said in a report.

At the same time, manufacturers were not happy about the forecast for the next six months. We caution against taking too much of this report because manufacturing in New York makes up a small portion of the country’s manufacturing base,” he wrote.

Concern pressures over slowing demand from China for the energy sector, with WTI futures CL.1 It fell 5.3% to trade near $87 a barrel. The SPDR ETF Energy Sector Selection
It’s down 3.7% but is still up about 37% for the year so far.

Read: Energy remains a great place for investors. Here is a list of “active” stocks to consider.

Stocks have been struggling to maintain upward momentum after a solid period that saw the S&P 500 post a four-week winning streak, its best advance in such a period since November 2020.

Similarly, the Nasdaq Composite is approaching four-month highs after rising 22.6% from its mid-June low. Stocks rebounded last week as the US Consumer Price Index and the Producer Price Index showed a slowdown in inflation, although it continued to rise.

“The good news about inflation that comes on the heels of the strong July jobs report has revitalized belief in a ‘soft landing’ for the economy. This is an outcome we thought was likely,” Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, said in a note. At least like a recession, now the markets are getting close to pricing in that scenario.”

“The danger is that markets are outpacing themselves, especially as FOMO investors start to take off,” she wrote, referring to the phenomenon known as “fear of missing out.”

Technical indicators point to the recently improved tone. Cboe VIX Volatility Index,
+ 2.05%And the
A measure of expected market volatility that typically rises when investors are scared, last week closed below its long-term average of 20. However, the VIX, as it is also known, rose 5.2% to 20.55 on Monday.

We see: Could a stock market bottom without a Wall Street fear gauge reach “panic” levels?

The breadth of the recent market rebound is also supportive, with Bespoke Investment noting that the percentage of S&P 500 stocks trading above the 50-day moving average has jumped to 88% from just 2% on June 16.

Source: Bespoke Investment

Also on Friday, the S&P 500 closed above 4,231, rebounding more than 50% of the 2022 sell-off from its record close on January 3 to its low on June 16. Technical analysts note that for the past half century the S&P 500 has not regained 50% of its bear market sell-off and then has continued to hit new cycle lows, although they caution that there is still the potential for sharp and near-term losses. volatility.

Read: Why stock market bulls are applauding the S&P 500 close above 4231

In other economic data, the National Association of Home Builders’ monthly confidence index It fell 6 points to 49 in Augustthe trade group said on Monday — the first time since 2020 that it has come in below the break-even scale of 50.

Companies in focus
  • shares The Walt Disney Company
    + 2.67%
    It rose 1.8% after Dan Loeb said Monday that his hedge fund Third Point LLC, which liquidated a large stake in the entertainment giant earlier this year, may “Big share buyback” in the Company and will seek to work with its management team to pursue strategic changes.

  • Tesla Corporation
    + 3.20%
    CEO Elon Musk signaled a milestone for the company on Sunday, tweeting that the electric car maker has produced more than 3 million vehicles, with A third of them are made in China. Shares rose 1.4%.

  • shares Bed Bath & Beyond Inc.
    + 8.73%
    It rose 7.9%, putting meme stock on the right track Fourth win in a row. The stock rose 21.8 percent on Friday and has risen 32.3 percent since it fell 14.2 percent on August 9, snapping its longest winning streak in 15 years. The home goods retailer’s meme stock is headed to gains 13 in 14 sessions.

How are the other assets?
  • 10-Year Treasury Bond Yield TMUBMUSD10Y,
    It fell 6.8 basis points to 2.782%.

  • ICE DXY US Dollar Index,
    + 0.70%
    Exchange rate rose 0.6%, stronger exchange rate helped push gold GC00,
    It fell 1.2% to trade below $1,794 an ounce.

  • Bitcoin BTCUSD,
    It rose above $25,000 for the first time since June, but then reversed, dropping 1.1% towards $24,000.

  • In Europe, Stoxx 600 SXXP,
    + 0.34%
    It rose 0.3%, while London’s FTSE 100 UKX Index rose,
    + 0.11%
    It was flat.

  • In Asia, Shanghai Composite SHCOMP,
    ended with a fractional decline, while the Hang Seng HSI,
    It fell 0.7% in Hong Kong and Japan’s Nikkei 225,
    + 1.14%
    1.1% advance.

Hear from Carl Icahn at The best new ideas at the Money Festival On September 21 and 22 in New York. The legendary merchant will reveal what he thinks of this year’s Wild Market Tour.

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