- US stocks crashed on Monday as investors struggled with soaring government bond yields.
- The US 10-year government bond yield rose as much as 12 basis points to a three-year high of 2.78%.
- Meanwhile, COVID-19 lockdowns throughout the city in China led to factory closures and production stoppages for various automakers.
US stocks fell on Monday as investors struggled with a continued rise in interest rates and a rise in COVID-19 cases in various Chinese cities.
The 10-year US government bond yield rose 12 basis points to a three-year high of 2.78% on Monday. The rise comes as the Federal Reserve looks set to initiate a 50 basis point rate hike at next month’s meeting of the Federal Open Market Committee along with a monthly reduction of $ 95 billion in the balance sheetaccording to its latest minutes.
Meanwhile, an increase in COVID-19 cases in China has led to city-wide shutdowns, including in Shanghai, a city of about 26 million people. The shutdowns have led to ongoing supply chain disruptions for automakers, including Nio, which was forced to halt production of its electric cars over the weekend. Tesla’s The Shanghai factory has also been shut down for about two weeks.
Here is where US indices stood at 16:00 ET closing on Monday:
- S&P 500: 4,412.63, a decrease of 1.69%
- Dow Jones Industrial Average: 34,308.08, a decrease of 1.19% (413.04 points)
- Nasdaq Composite: 13,411,96, a decrease of 2,18%
While China is struggling with an economic downturn due to COVID-19, Fundstrat’s Tom Lee sees it as a potentially bullish catalyst for equities, as the growth slowdown will give the Fed flexibility in its future rate hikes.
Twitter shares rose Monday after the news broke out that Tesla’s CEO Elon Musk would no longer join the company’s board of directors after acquiring a 9% stake. There was no indication that Musk would sell its stake down.
BlackRock believes that The Fed will not raise interest rates as much as the market thinks as inflation begins to fall. It can be a boon for risk takers.
“We’re in a tightening dynamic, we’re in a tightening period, but I do not think it’s going to be as aggressive as what the market is currently pricing, which is very, very aggressive,” says BlackRock’s Head of APAC. iShares investment strategy said Thomas Taw.
AT&T shares rose 8% on Monday after completing the spinoff of its WarnerMedia division to Discovery. AT&T will not focus on its telecommunications activities, which JPMorgan considered a bullish development in a Monday note. The bank upgraded AT&T to “Overweight” with a price target of $ 22.
Oil prices were lower on Monday due to to worry about declining demand for the item as China struggles with its recent rise in COVID-19 cases.
Bitcoin fell 5.00% to $ 40,002. Ether prices fell 5.53% to $ 3,000.
Gold increased as much as 1.05% to $ 1,966.10 per share. ounce. The interest rate on the 10-year Treasury added nine basis points to 2.75%.