US stock indexes ended on a mixed note after China announced it would open its borders next month, boosting investor hopes that the thawing of the world’s second-biggest economy will support global growth. Bond yields rose.
The S&P 500 fell 15.57 points, or 0.4%, to close at 3829.25 on Tuesday, the first trading session of the week after the holiday. The technology-focused Nasdaq Composite fell 144.64 points, or 1.4%, to 10353.23, while the Dow Jones Industrial Average gained 0.1%, or 37.63 points, to close at 33241.56.
China has maintained some of the world’s most restrictive coronavirus lockdown measures and slowed its economy significantly. Plans to lift Covid-19 quarantine requirements for international arrivals in early January could boost China’s economy when travel resumes.
This could prop up the global economy at a time when many nations have been raising interest rates to tame inflation. The Federal Reserve has announced that it will raise interest rates by spring.
Investors hope China’s reopening will support global growth.
Photo: Spencer Platt/Getty Images
Still, Covid-19 is spreading rapidly in China as the country reopens, prompting reports of overcrowded hospitals and flooded crematoria. Investors are weighing the impact of the outbreak on what the longer-term reopening will mean for the global economy.
“China has really pushed full steam ahead to abandon zero-Covid, and that effort will bring some growing pains,” said Michael Reynolds, vice president of investment strategy at Glenmede. “The explosion in case numbers there will likely be economically disruptive to the downside for them.”
Chinese electric vehicle maker NIO lowered its fourth-quarter delivery forecast, citing supply chain constraints caused by the Covid-19 outbreak in China. NIO’s American Depositary Receipts fell $0.91, or 8.3%, to $10.06 per share following the announcement.
Tesla, which this weekend extended the closure of its Shanghai manufacturing plant amid the outbreak, was among the worst performers on the S&P 500 on Tuesday. Tesla shares fell $14.04, or 11%, to $109.10 in a losing streak seven trading days extended. Shares of the electric vehicle maker fell more than 40% in December.
Disruptions related to the spread of the virus in China pose a risk for US companies, said Louis Navellier, chief investment officer at money management firm Navellier & Associates.
“Companies with strong China exposure are under pressure right now,” said Mr. Navellier.
Still, several Chinese companies traded on the US Nasdaq were among the best performers on Tuesday. JD.com and Baidu were both up more than 4%, while NetEase was up 2.9%. Shares of several casino operators with operations in Macau, China’s gaming hub, also rose. The Nasdaq Golden Dragon China Index, which tracks dozens of Chinese companies listed on American stock exchanges, rose more than 2%.
In US bond markets, the benchmark 10-year Treasury yield rose to 3.857% from 3.746% on Friday. Yields and prices move in the opposite direction.
A wave of flight cancellations sent Southwest Airlines shares down. Shares of the airline fell $2.15, or 6%, to $33.94 as it canceled almost two-thirds of its flights on Tuesday and said a reduced flight schedule would continue for days. The airline canceled around 8,000 flights Thursday through Monday amid winter storms, according to data from FlightAware.
In energy markets, Brent crude, the international benchmark for oil prices, rose 41 cents, or 0.5%, to $84.33 a barrel as Russia banned the supply of Russian oil and oil products to countries that impose a price cap. Oil has traded higher in five of the last six sessions.
In Europe, the pan-continental Stoxx Europe 600 gained 0.1%. The markets in Great Britain were closed.
Covid-19 cases in China have risen since authorities lifted most restrictions, prompting residents to self-isolate and stockpile medicines. WSJ’s Jonathan Cheng reports from Beijing on the risks associated with the country’s rapid reopening. Photo: Xiaoyu Yin/Portal
Stock indices in Asia rose, with the Shanghai Composite Index up 1%. The Hong Kong market was closed on Tuesday for a public holiday.
Write to Caitlin Ostroff at [email protected] and Jack Pitcher at [email protected]
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