Shares Drop After Four Consecutive Weeks of S&P 500 Gains

US stocks were lower on Monday, putting Wall Street on course to take a breather after another positive week as traders braced for big retail gains.

The Dow Jones Industrial Average fell 150 points, or 0.45%. The S&P 500 and Nasdaq Composite fell 0.46% and 0.23% respectively.

Monday’s moves come after disappointing economic data from China overnight. The country’s central bank also unexpectedly cut interest rates, raising concerns about China’s economic recovery.

Recession clouds are gathering worldwide. The Chinese economy contracted in the second quarter. The US experienced a ‘technical recession’. The flow of natural gas to Western Europe is limited. In the past three months we have updated our forecast for global growth to 2.5% Y in 2022, which is about 50 bps below consensus and 40 bps below May. We are getting closer to the bear scenario of our May half-year outlook,” Morgan Stanley’s Seth Carpenter wrote in a note to customers on Sunday.

Energy stocks fell 4% in early morning trading, led by the shares of Halliburton, Marathon Oil and Diamondback Energy, each falling more than 5%. Financial stocks Wells Fargo, Bank of America and Citigroup each rose 1%. Materials also fell 1%.

Last week, the S&P 500 rose 3.25% to record its fourth positive week in a row and its longest winning streak since 2021. The Nasdaq Composite finished the week higher at 3.08%, also for the fourth week in a row. The Dow added 2.9%.

The gains came after economic data showed that inflationary pressures could ease somewhat. The consumer price index was flat from June to July, the producer price index showed a surprising decline and import prices fell more than expected.

That helped relax investors who liked to call the mid-June lows the low of the cycle. Just as many were quick to say that the one month data does not necessarily make it a reliable trend.

Investors look forward to a week’s worth of earnings from major retailers, including Home Depot, Walmart and Target, and listen for clues about how their businesses have been impacted by inflation and other macro challenges in the most recent quarter.

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