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Market Snapshot: Dow, S&P 500 risk first decline in 5 sessions and Nasdaq on track for worst loss in 3 months as China data, Afghanistan deflate bulls

U.S. stock benchmarks traded lower late-morning Monday, with the Dow and S&P 500 looking at their first decline in five sessions, as weaker-than-forecast Chinese economic data and the Taliban takeover of Afghanistan weighed on sentiment.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average
    DJIA,
    -0.19%

    was trading 107 points, or 0.3%, lower at 35,406.
  • The S&P 500
    SPX,
    -0.31%

    declined 22 points, or 0.5%, at 4,445.
  • The Nasdaq Composite Index
    COMP,
    -0.81%

    gave up 169 points, or 1.1%, at 14,653, which would mark the steepest one-day percentage loss for the technology-laden index since May 12 when it fell 2.67%, FactSet data show.

Last week, the S&P 500 tacked on 0.7% and registered its 48th record close of 2021. The Nasdaq Composite registered a 0.1% dip, its second fall in three weeks. Both the S&P 500 and the Dow since Friday have registered four straight gains.

What’s driving markets?

A number of international and local developments cast a pall over the otherwise bullish mood on Wall Street, following a weekend of unrest in the Middle East and growing concerns about the spread of delta variant of COVID-19.

On a daily basis, the seven-day average for new COVID-19 cases rose to 130,808 as of Sunday, according to a New York Times tracker, up 64% from two weeks ago, to mark the 11th straight day above 100,000 and the highest rate since Feb. 3. The seven-day average of deaths was 662 on Sunday, up 113% from two weeks ago and the highest since early May, while the number hospitalized has increased 65% to 76,088.

Data released out of China showed retail sales, industrial production and fixed-asset investment all rising slower than forecast. “The slowdown is now plain for all to see. The delta outbreak and return of shutdowns across China isn’t helping either of course,” said Arne Petimezas, senior analyst at AFS.

“The Chinese data overnight is going to feed into the near-term uncertainty in the country as it desperately tries to get its Covid outbreak under control early,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.

Meanwhile, the New York Fed’s Empire State business conditions index in August lost nearly all of its record-setting gains from the prior month. The headline general business conditions index fell to 18.3 in August, from 43, the regional Fed bank said Monday. Economists expected a reading of 30, according to a survey by Econoday. 

To be sure, any reading above zero indicates improving conditions, but the sharp decline raises some concerns about the impact of delta’s spread.

That manufacturing report follows a stunning drop in the University of Michigan’s gauge of consumer sentiment, which was described as a “stunning loss of confidence.”

News headlines on Monday also have been focused on developments in Afghanistan, where the Taliban has swiftly taken power after the withdrawal of U.S. forces, leading some to wonder if political fallout will extend beyond foreign policy.

“For [President Joe] Biden, the developments in Afghanistan have created some unwelcome headlines just as further progress was being made on his economic agenda, with the Senate passage of the infrastructure bill with bipartisan support last week,” said Henry Allen, strategist at Deutsche Bank.

Reports indicated that President Biden plans to speak about the regime change in Afghanistan at 3:45 p.m. Eastern on Monday.

Meanwhile, a Wall Street Journal report, citing public statements and interviews, said a string of strong employment reports has strengthened the case for the rate-setting Federal Open Market Committee to announce its intentions to begin tapering its monthly purchases of $120 billion in Treasurys and mortgage-backed securities at its next meeting, on Sept. 21-22. Some strategists think the Fed may use an annual economic symposium in Jackson Hole, Wyo., on Aug. 26-28 as an opportunity to hint at tapering timing.  

“Despite splintering views within the FOMC, we look for the committee to announce plans for QE tapering as soon as the September 21-22 policy meeting, with tapering commencing in early 2022, or possibly earlier in late 2021,” wrote Kathy Bostjancic, chief U.S. financial economist, in a research note.

“With so much seemingly riding on the Fed in the coming weeks, I wonder whether we may see some more caution now in the run up to next week’s Jackson Hole event, when Jerome Powell may lay the groundwork for a tapering announcement in September,” wrote Erlam.

Which companies are in focus?
  • Shares of Tesla Inc. TSLA dropped in premarket trading Monday, after reports that the U.S. government has launched an investigation into the electric vehicle maker’s Autopilot system, after reports of multiple crashes into first-responder vehicles.
  • Alaska Air Group IncALK said Monday it is exercising options early on 12 Boeing Co.
    BA,
    -2.45%

    737-9 aircraft, bringing total firm commitments to 93 737-9 aircraft. Boeing shares fell more than 2%.
  • Oatly Group AB OTLY, shares rose in Monday, after the plant-based dairy company gave guidance ahead of expectations.
  • Shares of CureVac NV
    CVAC,
    +2.30%

     gained 1.5% Monday, but bucked the selloff in the biotechnology sector and the broader stock market, after the Germany-based company revealed upbeat preclinical data regarding its vaccine candidates against the coronavirus that causes COVID-19, in nonhuman primates.
  • Shares of Enlivex Therapeutics Ltd. ENLV soared 15% toward a five-month high, enough to pace all premarket gainers early Monday, after the Israel-based immunotherapy company said it received the OK to start a Phase 2b clinical trial for its treatment of severe and critical COVID-19 patients with acute respiratory distressed syndrome (ARDS). 
  • Aldi said Monday that it has 20,000 jobs to fill including store and warehouse associates when it hosts its National Hiring Week event from September 20 through 24. 
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y was 4.4 basis points lower at 1.26%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.1% on the session.
  • Oil futures traded lower, with the U.S. benchmark CL. 1 down 3% at $66.41 a barrel on the New York Mercantile Exchange. Gold futures GC00 traded 0.3% higher, at $1,783.70 an ounce.
  • In European equities, the Stoxx Europe 600 SXXP declined 0.5%, while London’s FTSE 100 UKX fell 1.1%.
  • In Asia, the Shanghai Composite SHCOMP finished positive but nearly unchanged, Japan’s Nikkei 225 NIK tumbled 1.6%, while Hong Kong’s Hang Seng Index HSI shed 0.8%.

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