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Wall Street on Monday saw stocks fall broadly after protests in China over prolonged Covid-19 restrictions hit the market again.
At the close of yesterday’s trading session, the Jones Industrial Average had lost 1.45% or 497.57 points to hit 3,963.94, while the Nasdaq Composite closed at 11,049.50 after a 1.58% decline.
The S&P 500 also plunged by at least 1.5%, falling 62.18 points to hit 3,963.94 at the end of the day.
Monday’s market moves came after demonstrations broke out in China against the zero-Covid policy backed by leader Xi Jinping. Thousands of people gathered on the streets of major Chinese cities to call on the president to step down as discontent over the strict coronavirus controls mounts.
Local governments have also tightened measures to try to curb rising cases despite Beijing easing some controls earlier this month, suggesting China may reopen in the near future.
The world’s second-largest economy’s moves have weighed on global markets’ various fronts.
After mass protests in China were reported by the media on Monday, West Texas Intermediate crude futures briefly fell to their lowest price since December 2021.
In addition, companies with large production facilities in China saw their shares fall amid the mounting pressure.
High-end smartphone and computer maker Apple fell 2.6% after media reported that protests at its biggest factory in China could cut production of iPhones Pro by 6 million units.
Crossmark Global Investments’ chief market strategist Victoria Fernandez said seeing Apple struggling to meet orders and demand because factories in China had closed was a clear example of how the situation in one country can affect another.
According to Ms. Victoria, something as big as the shutdown of the Chinese economy has a ripple effect on the global economy.
Meanwhile, market watchers expect the market to face more volatility ahead as investors digest the economic data set to be released this week.
Such information will reveal the state of the US economy and include key information such as personal consumption spending (Thursday), which the Federal Reserve sees as a key inflation measure, and November payroll statements (Friday).
In addition, investors await speeches by Fed Chairman Jerome Powell and other central bank officials to try to predict future interest rate hikes as they try to combat inflation battering the world’s largest economy.
In addition to tech stocks, banks and industrial stocks also pushed the market lower on Monday.
All three major indexes were lower after investors sold off amid concerns over China’s zero-Covid policy effects on supply chains.
However, the market still appears to be in the midst of a major rally in the fourth quarter of a tough year. Despite falling on Monday, the Dow had its best month in almost 50 years in October and added another 3% in November.
In addition, its major industrial stocks rose, including Caterpillar (CAT), Boeing (BA), and Honeywell (HON).
Other shares of retail or consumer giants have risen this year. The group includes Nike (NKE), Home Depot (HD), and Walgreens (WBA).
Financial companies such as Goldman Sachs (GS) and JP Morgan Chase (JMP) have also been on the rise.
The S&P 500 and the tech-heavy Nasdaq Composite remain red this 2022 with discounts of almost 17% and 30%, respectively. Furthermore, both indexes fell further on Monday.
However, compared to their lows for the year, both the S&P 500 and Nasdaq have rallied in recent weeks.
Again, hopes that the Fed will slow down its interest rate hikes have weighed significantly on rising stock prices even as inflation appears to be peaking.
However, analysts think that the reality could be different. Ms. Victoria expects the Fed president to agree with the market that the term rate should be at least 5% higher than in September.
Mr. Powell might also agree that a 50 basis point hike at the next Fed meeting would be appropriate and would likely reject expectations that interest rates will start to cut from October next year.
However, Ms. Victoria believes Mr. Powell could back off given the solid labor market data, as demand is still “decently” strong, but she stated that analysts expect the Fed to keep rates high for longer as a recession is expected.
Also, the market could be affected by China’s response to current demonstrations.
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