Stocks fluctuated early in the session but moved notably lower over the course of the trading day on Monday. The major averages added to the steep losses posted last week, with the Dow and the S&P 500 falling to their lowest closing levels since late 2020.
The major averages all finished the day firmly in negative territory. The Dow tumbled 329.60 points or 1.1 percent to 29,260.81, the Nasdaq slid 65.00 points or 0.6 percent to 10,802.92 and the S&P 500 slumped 38.19 points or 1.0 percent to 3,655.04.
A continued surge in the value of the U.S. dollar contributed to the weakness on Wall Street, with the greenback hitting a record high versus the British pound.
Aggressive interest rate hikes by the Federal Reserve continue to contribute to the increase by the dollar along with Britain’s new chancellor Kwasi Kwarteng’s announcement of a sweeping package of tax cuts.
“Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” said Morgan Stanley chief U.S. equity strategist Michael Wilson. “If there was ever a time to be on the lookout for something to break, this would be it.”
Concerns about the outlook for the global economy also continued to weigh on the markets amid worries the increases in interest rates around the world will lead to a recession.
The Fed and other central banks have indicated they plan to continue raising rates in an effort to combat stubbornly elevated inflation.
In the coming days, traders are likely to keep an eye on reports on durable goods orders, consumer confidence, new home sales and personal income and spending.
The extended weakness on Wall Street also came amid a spike in treasury yields, with the yield on the benchmark ten-year note soaring to a twelve-year high.
Airline stocks extended their recent sell-off amid concerns about the outlook for demand, resulting in a 4.5 percent nosedive by the NYSE Arca Airline Index. The index plummeted to a two-year closing low.
Substantial weakness was also visible among natural gas stocks, which saw further downside despite an increase by the price of the commodity. The NYSE Arca Natural Gas Index plunged by 3.2 percent to its lowest closing level in well over two months.
Interest rate-sensitive housing, commercial real estate and utilities stocks also saw considerable weakness due to worries out the impact of higher rates.
Energy, computer hardware and steel stocks also showed notable moves to the downside amid broad based weakness on Wall Street.
In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan’s Nikkei 225 Index plunged by 2.7 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.
Most European stocks also moved to the downside on the day. While the U.K.’s FTSE 100 Index ended the day little changed, the French CAC 40 Index dipped by 0.2 percent and the German DAX Index fell by 0.5 percent.
In the bond market, treasuries pulled back sharply after ending last Friday’s trading slightly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, skyrocketed 18.1 basis points to a twelve-year closing high of 3.878 percent.
Reports on durable goods orders, consumer confidence and new home sales are likely to attract attention on Tuesday along with remarks by Fed Chair Jerome Powell.
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