US stocks posted their biggest fall since May, with the tech-heavy Nasdaq Composite sinking 2.2% on Monday
US equity futures were trading mixed a day after concerns over the spread of infection from troubles in China’s property market broke an extended streak of calm in the stock market and pushed the S&P 500 towards its worst day since May. sent.
US stocks posted their biggest decline since May on Monday, with the tech-heavy Nasdaq Composite sinking 2.2%.
The S&P 500 fell 1.7% on Monday to 4,357.73, its biggest drop since May. The S&P 500 was coming out of a two-week loss and is on track for its first monthly decline since January.
The Dow Jones Industrial Average fell 1.8% to 33,970.47. The Nasdaq closed down 2.2% at 14,713.90. The Russell 2000 fell 2.4% to 2,182.20.
Technology companies led the broader market. Apple fell 2.1% and chipmaker Nvidia fell 3.6%.
Airlines were among the few bright spots. American Airlines rose 3% to lead all gainers in the S&P 500. Delta Air Lines added 1.7% and United Airlines added 1.6%.
“What’s happened here is that the list of risks eventually becomes too large to ignore,” said Michael Aron, chief investment strategist at State Street Global Advisors. “There’s a lot of uncertainty in seasonally challenging times for markets.”
Concerns over Chinese property developers and debt have recently focused on Evergrande, one of China’s biggest real estate developers, which looks like it may be unable to repay its debt.
Those property companies have been a big driver of the Chinese economy, which is the world’s second largest.
If they fail to meet their debts, the huge losses incurred by the investors holding their bonds will raise concerns about their financial strength. Those bondholders may also be forced to sell other, unrelated investments to raise cash, which could hurt prices in seemingly unrelated markets.
It is a product of how tightly interconnected global markets are, and it is a concept the financial world calls a “transition”.
Many analysts say they expect China’s government to prevent such a scenario, and it doesn’t look like a Lehman-type moment. Still, any sign of uncertainty could be enough to upset Wall Street as the S&P 500 climbed higher in an almost uninterrupted fashion since October, leaving the stock looking expensive and less prone to error. There is space.
On top of those concerns, investors are watching to see if the Federal Reserve can ease the accelerator on its support for the economy. And heavy government spending to counter the impact of the pandemic has raised the possibility that Congress could opt for a disastrous game of chicken before the US Treasury is allowed to borrow more money.
The Fed is due to deliver its latest economic and interest rate policy update on Wednesday.
Asian shares fell on Tuesday, falling 2% in Tokyo, as worries over heavily indebted Chinese real estate developers weighed on sentiment.
Markets remained closed in Taiwan, Shanghai and South Korea on Tuesday.
In Hong Kong, the Hang Seng fell 0.5% to 23,971.73 as sales to property developers slowed.
The Nikkei 225 fell 601.48 points to end at 29,898.57. Australia’s S&P ASX 200 slipped 0.1% to end at 7,244.80.
Analysts said fears of a worldwide ripple of damage from a property bust in China were based on memories of past financial crises such as the outbreak of the Japanese “bubble” economy or the sub-prime mortgage crisis of 2008.
In Japan, that catastrophe, called the Lehman Crisis leading to the 2008 collapse of Lehman Brothers, exacerbated the situation.
“Whisper that this could be China’s ‘Lehman moment’. Despite the Chinese market being closed until Wednesday, we are seeing knock-on selloffs across the world,” said Rabo Research.
Benchmark US crude rose 61 cents to $70.90 a barrel in energy trading. International benchmark Brent crude rose 57 cents to $74.49 a barrel.
In currency trading, the US dollar rose 10 cents to 109.49 Japanese yen. Euro was priced at $1.1740, up from $1.1726.
AP Business Writers Damien J. Trois, Stan Cho and Alex Vega contributed.