The stock market was under pressure Monday as a host of issues including U.S. political friction and a global energy crunch damped investor sentiment, while a trading halt on Evergrande shares made waves in Hong Kong.
Futures for the Dow Jones Industrial Average indicated an open 70 points lower, after the index rose 482 points Friday to close at 34,326. Futures for the S&P 500 and Nasdaq indicated a similar start to the trading week.
A familiar set of themes weighed on investor sentiment Monday. Analysts noted that the U.S. debt ceiling deadline in December and continuing political conflict over the $1 trillion infrastructure bill and $3.5 trillion reconciliation package muddied the waters.
“Inflation, the energy crisis, supply-chain issues, economic growth stuttering, concern that interest rates could go up sooner rather than later and China’s ongoing Evergrande debt problem remain at the forefront, clouding investment decisions and muddying the waters for anyone trying to make money on the market,” said Russ Mould, an analyst at broker AJ Bell.
The market this week will be focused on the U.S. payrolls report Friday, which comes as the Federal Reserve looks to employment indicators as it considers slowing, or tapering, its Covid-19 pandemic-era program of monthly asset purchases.
“Unless there is a marked deterioration across the whole sweep of labor market indicators within the report, this will likely be the catalyst to cement the November taper barring an exogenous or market shock,” said Jim Reid, a strategist at Deutsche Bank.
Hong Kong was rocked as shares in heavily indebted property developer China Evergrande (3333.H.K.) were suspended “pending the release by the Company of an announcement containing inside information about a major transaction.” Reports swirled in Chinese state-owned media that a rival, Hopson Development , would buy a major Evergrande unit. Trading in Hopson (0754.H.K.) stock was also halted.
In terms of economic news Monday, investors will be paying close attention to the meeting of the OPEC+ group of oil-producing countries—especially amid a global energy crunch and the pressure of power shortages on Chinese industry.
“OPEC+ has a regular record of surprising, but I doubt that the grouping will be willing to [do] much more than throw a few Band-Aids on production levels,” said Jeffrey Halley, an analyst at broker Oanda.
Oil prices were little moved in the run-up to any decision from OPEC+, with U.S. crude futures hovering around $75.80 a barrel.
Here are four stocks on the move Monday:
Wm Morrison Supermarkets (MRW.U.K.) fell 3.8% in London, after private-equity group Clayton, Dubilier & Rice won the auction to buy the major British supermarket for £7 billion ($9.5 billion).
Adidas slipped 2.5% (ADS.Germany), after shares in the sportswear giant were downgraded to “underperform” by Bank of America.
Merck (MRK) was another major gainer in the premarket, up 3.6%. The pharmaceutical giant had two big pieces of news last week: that an experimental oral antiviral pill was active against coronavirus variants that cause Covid-19; and that it would buy biotech Acceleron Pharma (XLRN) for around $11.5 billion.
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