- US stocks tumbled on Monday as investors struggled with rising Treasury yields.
- The US 10-year Treasury yield rose as much as 12 basis points to a three-year high of 2.78%.
- Meanwhile, city-wide COVID-19 lockdowns in China have led to plant closures and production halts at various automakers.
Loading Something is loading.
US stocks tumbled on Monday as investors grappled with a sustained rise in interest rates and a surge in COVID-19 cases in various Chinese cities.
The US 10-year Treasury yield rose 12 basis points to a three-year high of 2.78% on Monday. The surge comes as the Federal Reserve is expected to initiate a 50 basis point rate hike at next month’s Federal Open Market Committee meeting, according to its latest meeting minutes, along with a $95 billion monthly reduction in its balance sheet.
Meanwhile, a surge in COVID-19 cases in China has prompted citywide lockdowns, including in Shanghai, a city of about 26 million people. The lockdowns have caused ongoing supply chain disruptions for automakers, including Nio, which was forced to halt production of its electric vehicles over the weekend. The Tesla plant in Shanghai has also been shut down for about two weeks.
Here’s how the US indices stood at 4:00 p.m. ET on Monday:
As China grapples with an economic slowdown due to COVID-19, Fundstrat’s Tom Lee sees this as a potentially bullish catalyst for equities as the growth slowdown will give the Fed flexibility in its future rate hikes.
Twitter shares rose on Monday after it was announced that Tesla CEO Elon Musk would be stepping down from the company’s board after acquiring a 9% stake. There was no indication that Musk would sell down his stake.
BlackRock believes that the Fed will not hike rates as much as the market thinks if inflation starts to ease. That could be a boon for risky assets.
“We’re in a tightening dynamic, we’re in a tightening phase, but I don’t think it’s going to be as aggressive as what the market is currently pricing in, which is very, very aggressive,” said BlackRock’s Head of APAC iShares investment strategy said Thomas Taw.
AT&T stock rose 8% on Monday after the company completed the spin-off of its WarnerMedia division to Discovery. AT&T will not focus on its telecom operations, which JPMorgan said Monday was an upbeat development. The bank upgraded AT&T to overweight with a price target of $22.
Oil prices were lower on Monday on concerns of lower demand for the commodity as China grapples with its recent spate of COVID-19 cases.
West Texas Intermediate crude fell as much as 3.92% to $94.41 a barrel. Brent crude, the international benchmark for oil, fell as much as 3.60% to $99.08.
Bitcoin fell 5.00% to $40,002. Ether prices fell 5.53% to $3,000.
Gold rose a whopping 1.05% to $1,966.10 an ounce. The yield on the 10-year government bond increased by nine basis points to 2.75%.