By Vivien Lou Chen and William Watts
Dow industrials eked out a slightly positive finish on Monday, while the S&P 500 saw its gains entirely evaporate during the final hour of trading, extending a stock-market selloff following a batch of weak data from China and the U.S. that fueled more concerns about the state of the global economy.
How did stocks trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.23% finished up by 26.76 points, or less than 0.1%, at 32,223.42.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.36% closed down by 15.88 points, or 0.4%, at 4,008.01. It’s finished down six of the past eight trading days, according to Dow Jones Market Data.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.35% finished lower by 142.21 points, or 1.2%, at 11,662.79. That’s off by 27% from its record close of 16,057.44 reached on Nov. 19, 2021.
Last week, the Dow fell 2.1%, the S&P 500 slid 2.4% and the Nasdaq dropped 2.8%. It was the S&P 500’s sixth weekly fall — its longest losing streak since June 2011. The Nasdaq also fell a sixth consecutive week, booking its longest losing streak since November 2012.
What drove the markets?
The Dow and S&P 500 struggled to hold earlier gains on Monday following Friday’s modest relief rally, which still left equities sharply lower last week. Some investors remain skeptical the central bank can get inflation under control without causing a sharp slowdown.
On Monday, the New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, plummeted 36.2 points to negative 11.6 in May . Economists had expected the index to fall slightly to a solid 16.5 reading, according to a survey by The Wall Street Journal. Any reading below zero indicates deteriorating conditions.
Earlier in the day, fresh economic data from China appeared to trigger some investor jitters as that country revealed continued fallout from recent COVID lockdowns. The data complicates an already cloudy picture for U.S. investors, experiencing a bear market for tech stocks and close to one for the S&P 500.
“Today’s market ructions are driven by China, COVID, and the threat of recession,” said Hans Olsen, chief investment officer for Fiduciary Trust Company in Boston. “Add to this cocktail a rising rate environment, and investors are a bit concussed wondering where to shelter from the whirlwind of bad news.“From our perch, the market volatility we see is a function of a fundamental repricing of risk brought about by normalizing interest rates in a stubbornly high inflation environment,” Olsen said in an email to MarketWatch. “We are in the early innings of this contest between growth, inflation, COVID, and a market determined interest rate.” Goldman Sachs cut its 2022 U.S. growth outlook to 2.4% from 2.6% previously, and to 1.6% from 2.2% for 2023, on fears over an uncertain growth path and tightening financial conditions. The bank also cut its S&P 500 target again, to 4,300.
Meanwhile, former Fed Chairman Ben Bernanke told the New York Times the U.S. could be heading into a period of stagflation for the first time since the 1970s.
Monday’s stock action still offered a few glimmers of hope, particularly during the afternoon when the Dow and S&P 500 were both trading higher. “We’ve all been concerned that because of rising rates, we’ve lost the dip buyer,” said Eric Leve, chief investment officer at Bailard, an asset and wealth manager that oversaw $5.5 billion as of March. “We’re seeing early evidence that the dip buyer is still there. For now, its defensive names that continue to support the market, those with good earnings growth and dividend yields.”Retailers will be in the spotlight this week, with Walmart Inc. /zigman2/quotes/207374728/composite WMT +0.71% and Home Depot Inc. /zigman2/quotes/208081807/composite HD -0.05% are due to report Tuesday, and Target Corp. /zigman2/quotes/207799045/composite TGT -0.62% , Lowe’s Cos. /zigman2/quotes/205563664/composite LOW -0.46% later in the week. Deere & Co. /zigman2/quotes/207941296/composite DE -1.02% is another big names expected this week. Walmart earnings preview: Walmart’s exposure to lower-income consumers gives analysts pause
U.S. wheat futures /zigman2/quotes/210389638/delayed W00 +1.93% surged after India said it would limit almost all exports of the commodity. The country has suffered an intense heat wave that has damaged its crops, while global agriculture prices have been surging this year from Russia’s invasion of Ukraine.