US stocks fall as oil prices fall, and Chinese stocks fall

US stocks tumbled, oil prices tumbled and Chinese stocks suffered their worst sell-off in more than two years, as Beijing stuck to its Covid-free strategy while facing rising cases in major cities.

The S&P 500 fell 0.8% in the afternoon session on Monday. The technology-focused Nasdaq Composite Index recently gained less than 0.1%, while the Dow Jones Industrial Average lost 0.6%, or about 200 points. On Friday, the Dow posted its worst one-day percentage change since October 2020, dropping nearly 1,000 points.

Twitter posts added about 4%. People familiar with the matter said the social media company is in advanced discussions to sell itself to Elon Musk and could close a deal on Monday.

Investors are concerned that China’s tough anti-Covid-19 policies will further disrupt global supply chains. Ongoing disruptions to manufacturing and the movement of goods since the start of the pandemic have pushed inflation in the United States to its highest level in four decades. New lockdowns in China and Russia’s war against Ukraine are likely to drive up prices.

“A lot of supply chains are directly affected by China,” said Brian Price, head of investment management at Commonwealth Financial Network. “The longer they are online, the greater the impact of inflation around the world.”

On Monday, the Shanghai Composite and CSI 300 were down 5.1% and 4.9%, respectively. Those were the largest one-day percentage declines for both benchmarks since February 2020, in the early days of the pandemic.

The offshore yuan fell about 1% to trade at around 6.59 per dollar. This was the lowest since November 2020, according to FactSet. This pullback was built on last week’s selling which ended months of relative stability.

With Shanghai still on lockdown amid China’s biggest outbreak of Covid-19, residents are turning to social media to vent about food shortages or are bartering with neighbours. Anxiety and hunger prompt many to question Beijing’s anti-epidemic strategy. Photo: Chinatopix via AP

“The problem with inflation is that it can become embedded and we see inflation become very flat,” said Sebastian Mackay, multi-asset fund manager at Invesco. “What we’re seeing is a combination of the war in Ukraine and the shutdown in China causing supply problems.”

Restricted movement in China may also drain oil demand. Brent crude, the international oil benchmark, fell 5.6 percent to $100.20 a barrel. Despite the decline, oil prices remain close to historically high levels due to fears of turmoil in energy markets from the Russian invasion of Ukraine.

Energy stocks fell 5.5%, topping the decliners in the Standard & Poor’s 500 Index. Schlumberger shares fell 9.5%, Halliburton fell 8.1%, and AbaAnd

Apache Corp.

The parent company’s stock fell 7.7%.

In other corporate news, Coca-Cola shares were recently down 0.3%. The company said it posted higher sales in the fourth quarter as demand continued to face rising prices. Advanced Micro Devices prices rose 2.4% after an analyst Raymond James upgraded his assessment of the chip maker’s shares.

The Whirlpool Company will announce its earnings after the market closes.

High inflation caused the Federal Reserve to increase efforts to combat it. Last week, Federal Reserve Chairman Jerome Powell signaled that the central bank was ready to tighten monetary policy faster and indicated it was likely to raise interest rates by half a percentage point at its May meeting.

Investors seem to be considering whether a bigger rally is still possible, Price said. “This has scared some investors,” he said.

Money managers are concerned that large increases in federal interest rates could slow economic growth or even push the economy into recession. Mr. Mackay said this could lead to a situation where the Fed would have to raise interest rates in the short term but cut them in the long term.

The Cboe Volatility Index – the so-called Wall Street fear gauge, also known as VIX – rose to 30.40, near its highest level since mid-March.

The yield on the benchmark 10-year Treasury fell to 2.789% on Monday from 2.905% on Friday as investors sought safer assets to hold. Yields and prices move inversely. The Wall Street Journal Dollar Index, which measures the dollar against a basket of currencies, was up 0.6%.

The Dow Jones Industrial Average on Friday posted its worst one-day percentage change since October 2020.


picture:

Brendan McDermid/Reuters

Gold futures fell 1.7 percent to $1,901.00 an ounce. While gold has historically been seen as a hedge against inflation, it pays no yield, making it less attractive than government bonds at a time when interest rates are rising. The cost of buying gold, denominated in dollars, is also more expensive for foreign investors when the dollar is rising.

Bitcoin, the world’s largest cryptocurrency by market capitalization, fell 1.8% of its dollar value at 5 p.m. ET Sunday to trade at $38815.22 on Monday. Cryptocurrencies can move in line with the broader market sentiment, with investors buying the riskiest and most volatile assets when the sentiment is strong and selling when the weakest.

Offshore, the Stoxx Europe 600 Index closed 1.8% lower. South Korea’s Kospi Index fell 1.8%, and Japan’s Nikkei 225 Index contracted 1.9%.

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Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Justin Baer at justin.baer@wsj.com

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