Big Tech drags US stocks lower; Dollar Gains: Markets Wrap

(Bloomberg) – U.S. stocks fell as concerns mounted that China could tighten Covid curbs after a string of reported deaths. Concerns over US growth prospects also continued to weigh on investors as the Federal Reserve vows to be persistent in fighting inflation.

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The S&P 500 was swept up in the technology sector. The tech-heavy Nasdaq 100, which is typically more interest-rate sensitive, was dragged lower by declines in Apple Inc., Tesla Inc. and Amazon.com Inc. Walt Disney Co. defied the risk aversion that swept markets after it brought back former leader Bob Iger to replace his successor, Bob Chapek, as chief executive officer.

Crude oil futures pared losses after Saudi Arabia denied a report that it was discussing increasing oil production for next month’s OPEC+ meeting. The dollar strengthened as investors sought safe haven assets. Government bond yields fell.

China saw its first Covid-related death in nearly six months on Saturday, and two more were reported on Sunday. Worsening outbreaks across the country are fueling fears that authorities may once again resort to tough restrictions. Shutdowns could negatively impact supply chain dynamics and potentially exacerbate inflation problems across economies.

The offshore yuan’s weakening against the dollar on Monday is the “biggest negative macro factor price driver for the S&P 500,” said Charlie McElligott, managing director of cross-asset strategy at Nomura Securities International.

“This renewed dollar strength is also contributing to tighter ‘USD liquidity’ while also acting as a headwind for US equities from the S&P 500 to Nasdaq to Russell,” he said.

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Traders will also be scouring the minutes of the Federal Reserve’s most recent monetary policy meeting this week for further clues on the trajectory of rate hikes.

“For the Fed, if we’re getting some inflation slowdown right now – which it seems we can get that – but you don’t see it in service inflation slowdown, then that’s related to a tight labor market,” Veronica Clark, Economist at Citigroup said Monday on Bloomberg Television. “You need to see this easing in the jobs data.”

Atlanta Fed President Raphael Bostic said he favors slowing the pace of rate hikes with no more than 1 percentage point more hikes to try to ensure a soft landing for the economy. Boston Fed Chair Susan Collins reiterated her view that options are open for the size of December’s rate hike, including the possibility of a 75 basis point move.

Important events this week:

• US Richmond Fed Manufacturing index, Tuesday

• OECD publishes economic outlook, Tuesday

• The Fed’s Loretta Mester and James Bullard speak Tuesday

• S&P Global PMIs: US, Eurozone, UK, Wednesday

• US MBA Mortgage Applications, Durables, Initial Jobless Claims, University of Michigan sentiment, New Home Sales, Wednesday

• Minutes of the Federal Reserve meeting of November 1-2, Wednesday

• The ECB will publish a report on its October monetary policy meeting on Thursday

• US stock and bond markets are closed for the Thanksgiving holiday, Thursday

• US stock and bond markets close early on Friday

Some of the key movements in the markets:

Stocks

• The S&P 500 was down 0.5% as of 12:08 p.m. New York time

• The Nasdaq 100 fell 1%

• The Dow Jones Industrial Average fell 0.3%

• The Stoxx Europe 600 has hardly changed

• MSCI World Index up 0.6%

currencies

• The Bloomberg Dollar Spot Index rose 0.8%

• The euro fell 0.9% to $1.0235

• The British pound fell 0.8% to $1.1789

• The Japanese yen fell 1.2% to 142.12 per dollar

cryptocurrencies

• Bitcoin fell 1.4% to $16,031.02

• Ether fell 2.5% to $1,113.37

Bind

• The 10-year government bond yield fell two basis points to 3.81%

• The 10-year German government bond yield fell two basis points to 1.99%

• The 10-year UK government bond yield fell five basis points to 3.19%

raw materials

• West Texas Intermediate Crude fell 5.1% to $76.03 a barrel

• Gold futures fell 1.1% to $1,749 an ounce

This story was created with the support of Bloomberg Automation.

–Assisted by Isabelle Lee and John Viljoen.

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