December 6, 2023

Markets Start the Week Lower

Stocks fell sharply on Monday, following the worst weekly decline for the Standard Poor’s 500-stock index in two months, on concerns that the Federal Reserve’s stimulus may be drawing to a close and a cash squeeze in China could further slow growth.

In morning trading, the S.P. was 1.6 percent lower, the Dow Jones industrial average fell 1.4 percent — about 220 points — and the Nasdaq composite lost 1.5 percent. European and Asian shares also slumped.

Banking shares in China tumbled to their biggest daily loss in almost four years after the People’s Bank of China, the country’s central bank, said lenders needed to do a better job of managing their cash and loans. The central bank is attempting to move China, the world’s second largest economy, away from credit-driven investment.

The S.P. 500 has fallen 2.3 percent in June, and is on track for its worst monthly performance since May 2012. The index is down 4.6 percent from its closing high on May 21.

“We are starting to see that follow-through in Asia, which is all part of the broader narrative — the focus on a lack of stimulus, a creeping higher in rates and the potential impact for less liquidity globally,” said Peter Kenny, chief market strategist at Knight Capital in Jersey City. “This underscores the power and the importance of Fed policy to global central banking.”

The shift out of assets which have benefited most from cheap money has been sharpest in the United States debt market, where yields on 10-year Treasury notes hit 2.6 percent on Monday, its highest level since August 2011.

This rise in rates and the brighter outlook for the American economy, which was behind the Fed’s decision, has favored the dollar against most major currencies. The dollar index was up 0.4 percent at 82.66 points on Monday, building on last week’s 2.2 percent rally, its biggest weekly gain in 19 months.

Against the yen, the dollar was down 0.2 percent to 97.71 yen, while euro fell 0.3 percent to $1.3078, a level not seen since June 6.

Tenet Healthcare, a hospital operator, said it would buy smaller rival Vanguard Health Systems for $4.3 billion, or $21 per share including debt, to expand into new geographies. In early trading Vanguard shares jumped 67.1 percent and Tenet gained 7.1 percent.

Rising interest rates served to dent gold prices, weighing on mining stocks, while other commodities were also pressured by strength in the dollar.

Barrick Gold Corp will lay off up to a third of its corporate staff at its Toronto headquarters and other offices, sources said, as the world’s top bullion producer intensifies downsizing amid a slump in the price of gold. United States-listed shares dipped 3.6 percent.

Freeport McMoRan Copper and Gold has restarted some operations at the world’s second-biggest copper mine after receiving approval from the Indonesian government. Freeport shares shed 3 percent.

European equity markets remained weak despite data showing German business morale picking up for a second straight month in June, pointing to a slow recovery for Europe’s largest economy. The Euro Stoxx 50 of euro zone blue chips was down 1.8 percent, and the FTSE 100 in London lost 1.5 percent.

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