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Concerns About China Covid Surge Weighing On Wall Street

wallstreet nov02 21nov22 lt

Stocks have moved mostly lower in morning trading on Monday, giving back ground after ending last Friday's choppy session mostly higher. The major averages have all moved to the downside, with the tech-heavy Nasdaq leading the way lower.

In recent trading, the major averages have fallen to new lows for the session. The Dow is down 106.36 points or 0.3 percent at 33,638.33, the Nasdaq is down 103.34 points or 0.9 percent at 11,042.72 and the S&P 500 is down 22.54 points or 0.6 percent at 3,942.80.

Concerns about the outlook for the global economy are weighing on Wall Street amid a surge in new Covid cases in China.

China reported the death of three people after contracting Covid, marking the first Covid-related deaths that China's mainland has reported since May.

The surge in new cases had led China to impose stringent restrictions in cities like Beijing and Shanghai, shattering recent hopes the country would soon ease Covid curbs.

"Stocks are lower as the global growth picture takes a hit following key China Covid lockdowns and as the US economy could have to deal with a massive rail worker strike before the holidays," said Edward Moya, senior market analyst at OANDA.

He added, "Adding to the risk aversion tone are rising concerns that future Russian attacks on Ukraine's nuclear power supply could be catastrophic.

Trading activity remains somewhat subdued, however, with some traders likely looking to get a head start on the upcoming Thanksgiving Day holiday."

A lack of major U.S. economic data may also be keeping some traders on the sidelines, although reports on durable goods orders and new home sales are likely to attract attention on Wednesday along with the minutes of the latest Federal Reserve meeting.

Energy stocks are seeing substantial weakness amid a steep drop by the price of crude oil, with crude for December delivery plummeting $4.54 to $75.54 a barrel.

Reflecting the sell-off in the energy sector, the Philadelphia Oil Service Index is down by 6.6 percent and the NYSE Arca Oil Index is down by 4.1 percent.

Significant weakness has also emerged among computer hardware stocks, as reflected by the 2.3 percent slump by the NYSE Arca Computer Hardware Index.

Steel, semiconductor and gold stocks have also moved to the downside, while some strength is visible among utilities and tobacco stocks.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday. China's Shanghai Composite Index fell by 0.4 percent and Hong Kong's Hang Seng Index tumbled by 1.9 percent, although Japan's Nikkei 225 Index bucked the downtrend and edged up by 0.2 percent.

The major European markets have also moved to the downside on the day. While the U.K.'s FTSE 100 Index is down by 0.3 percent, the French CAC 40 Index is down by 0.4 percent and the German DAX Index is down by 0.5 percent.

In the bond market, treasuries are regaining ground following the pullback seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.4 basis points at 3.784 percent.

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