U.S. markets tremble as Beijing lockdowns and "aggressive Fed" spark economic fears
U.S. markets continue to tumble on Monday as rising COVID-19 cases in China trigger concerns of more pandemic lockdowns that would crimp economic recoveries in the region.
As of 11:36 a.m. Eastern Time, the S&P was down 1.1%, and the Dow was down 1%. After a brief rally in early morning trading, the tech-heavy Nasdaq Composite was back down by 0.2%.
Shanghai, China's most populous city with some 25 million inhabitants, was largely at a standstill on Friday as China battled its worst wave of coronavirus infections since the start of the pandemic.
The hardships of the lockdown have raised questions about the Chinese government's adherence to its hardline "zero-COVID" strategy, CBS News' Lucy Craft reported. As Shanghai doubles down on restrictions and COVID-19 cases rise in Beijing, China's GDP is set for a "zero-COVID recession," according to Craig Botham, chief China economist at Pantheon Macroeconomics. "We expect a further slowdown of growth in Q2, amounting to a recession, on our estimate of GDP," Botham said in a monthly report.
Adding to investors' concerns are movements by the U.S. Federal Reserve. Federal Reserve Chair Jerome Powell has indicated the central bank may hike short-term interest rates at double the usual pace at upcoming meetings, starting in two weeks. The Fed has already raised its key overnight rate once, the first such increase since 2018.
"Global risk-off sentiment sent equities tumbling as COVID-19 worsens in China and concerns over a more aggressive Fed grow," according to TD Securities analysts.
Stocks fell sharply on Friday in response to Federal Reserve signals. As the sell-off accelerated in the afternoon, the S&P 500 fell 122 points, or 2.8%, to close at 4,272. The Dow Jones Industrial Average tumbled 981 points, or 2.8%, and the tech-heavy Nasdaq Composite sank 2.5%.
Musk bid boosts Twitter shares amid market slump
Investors are also watching profit reports from companies. Several reports from U.S. companies, which have already been released, have been disappointing, contributing to the fall that ended last week on Wall Street.
Markets around the world are feeling similar pressure on rates and inflation, particularly in Europe as the war in Ukraine pushes up oil, gas and food costs.
Shares in Twitter were up 4% after multiple media outlets reported that the company's board and Tesla CEO Elon Musk negotiated into the early hours of Monday over his bid to buy the social media platform. Musk said last week that he had lined up $46.5 billion in financing to buy Twitter, putting pressure on the company's board to negotiate a deal.
In energy trading, oil prices slipped more than $4 per barrel. Benchmark U.S. crude slipped to $97.36 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, fell to $101.29 a barrel.
