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Dow struggles for direction as weak Chinese data fuels pressure on stocks, and global recession worries grow

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Dow industrials had a marginally positive finish on Monday, while the S&P 500 saw its gains evaporate entirely in the final hour of trading, extending a stock market selloff following a batch of weak data from from China and the United States which fueled further concerns about the state of the global economy.

How did the stocks trade?
  • The Dow Jones Industrial Average DJIA,
    +0.08%
    ended up 26.76 points, or less than 0.1%, at 32,223.42.

  • The S&P 500 SPX,
    -0.39%
    closed down 15.88 points, or 0.4%, at 4,008.01. It has completed six of the last eight trading days, according to Dow Jones Market Data.

  • The Nasdaq Composite COMP,
    -1.20%
    ended down 142.21 points, or 1.2%, at 11,662.79. That’s down 27% from its all-time high close of 16,057.44 reached on November 19, 2021.

Last week, the Dow Jones fell 2.1%, the S&P 500 2.4% and the Nasdaq 2.8%. It was the S&P 500’s sixth weekly week, its longest losing streak since June 2011. The Nasdaq also fell for a sixth straight week, booking its longest losing streak since November 2012.

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What drove the markets?

The Dow Jones and S&P 500 struggled to hold onto gains earlier on Monday after Friday’s modest relief rally, which left stocks sharply lower again last week. Some investors remain skeptical about the central bank’s ability to control inflation without causing a sharp slowdown.

On Monday, the New York Fed’s Empire State Business Conditions Index, an indicator of manufacturing activity in the state, fell 36.2 points to minus 11.6 in May. Economists expected the index to fall slightly to 16.5, according to a Wall Street Journal survey. Any reading below zero indicates deteriorating conditions.

Earlier today, fresh economic data out of China appeared to trigger some concern among investors as that country revealed the continued fallout from recent COVID shutdowns. The data complicates an already murky picture for U.S. investors, experiencing a bear market for tech stocks and near one for the S&P 500.

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Today’s market turmoil is driven by China, COVID and the threat of recession, said Hans Olsen, chief investment officer of Fiduciary Trust Company in Boston. Add to that cocktail a rising rate environment, and investors are a little confused wondering where to take shelter from the whirlwind of bad news.

From our perspective, the market volatility we’re seeing is a function of a fundamental repricing of risk caused by the normalization of interest rates in an environment of stubbornly high inflation, Olsen said in an email to MarketWatch. . We are in the early innings of this competition between growth, inflation, COVID, and a market-determined interest rate.

Goldman Sachs lowered its U.S. growth outlook for 2022 to 2.4% from 2.6% previously, and to 1.6% from 2.2% for 2023, fearing an uncertain growth trajectory and tightening financial conditions. The bank also cut its S&P 500 target again, to 4,300.

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Meanwhile, former Fed Chairman Ben Bernanke told the New York Times the United States could enter a period of stagflation for the first time since the 1970s.

Monday’s stock action still offered some glimmers of hope, particularly in the afternoon when the Dow Jones and S&P 500 both traded higher.

We’re all worried that due to rising rates we’ve lost the dip buyer, said Eric Leve, chief investment officer at Bailard, an asset and wealth manager that has overseen $5.5 billion. in March. Have seen the first evidence that the dip shopper is still around. For now, its defensive names that continue to support the market, those with good earnings growth and dividend yields.

Retailers will be in the spotlight this week, with Walmart Inc. WMT,
+0.11%
and Home Depot Inc.
HD,
-0.01%
are due to report on Tuesday, and Target Corp.

TGT,
-0.22%,
Lowe Cos.
LOW,
+0.38%
later in the week. Deere & Co.
FROM,
+2.12%
is another big name expected this week. Walmart Revenue Snapshot: Walmart’s exposure to low-income consumers gives analysts pause

US wheat futures W00,
+1.12%
surged after India said it would curb nearly all exports of the commodity. The country suffered an intense heat wave that damaged its crops, while world agricultural prices have risen this year following Russia’s invasion of Ukraine.

Which companies were targeted?
  • McDonald’s Corp.
    MCD,
    -0.41%
    plans to reserve a charge of $1.2-1.4 billion to exit the Russian market. Its shares ended down 0.4%.

  • Shares of Spirit Airlines Inc.
    TO SAFEGUARD,
    +13.49%
    finished 13.5% higher after JetBlue Airways Corp.
    JBLU,
    -6.06%
    launched a tender offer to buy the discount airline. Earlier this month, Spirit rejected an offer from JetBlue, preferring to stick with a competing offer from Frontier Group Holdings Inc.
    ULCC,
    +5.85%.
    JetBlue shares closed 6.1%, while Frontier shares ended up 5.9%.

  • Shares of ManTech International Corp.
    MANT,
    +15.03%
    ended up 15% after the IT services provider for U.S. defense and federal civilian agencies announced an agreement for an acquisition by an investment company Carlyle Group Inc.
    CG,
    -0.29%
    in an all-cash transaction valued at $4.2 billion. Carlyle shares closed 0.3%.

How have other assets traded?
  • The yield of the 10-year note TMUBMUSD10Y,
    2.897%
    fell 5.5 basis points to 2.877%. Yields and debt prices move in opposite directions.

  • Oil futures ended sharply higher, with West Texas Intermediate crude for delivery in June CLM22,
    +0.48%
    up $3.71, or 3.4%, to close at $114.20 a barrel on the New York Mercantile Exchange as gasoline futures hit another closing record high.

  • Gold futuresGC00 also ended higher, settling at $1,814 an ounce.

  • In European equities, the Stoxx Europe 600 SXXP,
    +0.04%
    ended down less than 0.1%, while London’s FTSE 100 UKX,
    +0.63%
    closed up 0.6%.

  • In Asia, the Shanghai CompositeCN:SHCOMP fell 0.3%. Meanwhile, the Hang Seng HK:HSI index ended up 0.3% and Japan’s Nikkei 225JP:NIK rose 0.5%.

Barbara Kollmeyer contributed to this article.

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Sources

1/ https://Google.com/

2/ https://www.marketwatch.com/story/u-s-stock-futures-wobble-as-weak-china-data-fuels-more-global-recession-worries-11652694159

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