What happened
- The Dow Jones Industrial Average finished up by 43.04 points, or 0.1%, at 34,006.88, after having declined as much as 183 points at its session low.
- The S&P 500 ended up by 17.38 points, or 0.4%, at 4,337.44.
- The Nasdaq Composite closed up by 59.51 points, or 0.5%, at 13,271.32.
- Monday’s gains were the first for all three major indexes of the past five sessions.
Last week, the S&P 500 fell 2.9%, its biggest weekly decline since the period that ended on March 10, and finished at its lowest level since June 9. The Dow ended Friday at its lowest level since July 10, while the Nasdaq saw its lowest close since June 7.
What’s driving markets
A rapid climb in long-term interest rates continued to set the tone across markets, decreasing the present value of future corporate earnings and weighing on stocks.
The yield on the 10-year Treasury rose by 10.3 basis points to end at 4.541%, or the highest close since Oct. 17, 2007. Its 30-year counterpart jumped 13.7 basis points to finish at 4.658%, the highest close since March 8, 2011.
“We are getting to a point where 10- and 30-year rates are having a somewhat adverse effect on equities,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. “We got through the 4.36% level on 10-year notes overnight between Sept. 20-21 — which had been last year’s and this year’s highest yield — and that’s when the bottom fell out. It kept going and hasn’t stopped.”
Via phone, di Galoma said that’s “causing a tremendous amount of selling because the next stop is probably near the 4.77% level on the 10-year rate and, if we don’t hold there, we could be looking at a 5.1% to 5.12% rate in the next two to four weeks.”
Another factor stoking concerns about the outlook is oil prices, which have risen sharply since summer. Brent crude BRN00, the global benchmark, and West Texas Intermediate crude CL00, the U.S. benchmark, were above or near $90 a barrel.
“Inflation seems stickier, and a lot of news has turned not as positive,” said Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta, which oversees about $2.5 billion. That’s adding to concerns that the stock market “is at a challenging level to continue to post gains” after having rallied over the past year.
“Markets walked away from last week’s Federal Reserve meeting with more confidence that rates will be higher for longer, and that’s putting downward pressure on equities,” Buchanan said via phone.
Meanwhile, the U.S. government is barreling toward a partial shutdown Sunday morning. While stocks have managed to withstand similar scenarios before, “there’s growing concern over the potential that this could be a little bit more impactful than shutdowns in the past,” Buchanan said. “The market is becoming more aware of the potential for a more drawn-out shutdown.”
On the labor front, union leaders and Hollywood studios reached a tentative deal Sunday to end a historic screenwriters strike after nearly five months. No deal appeared in the works, however, for striking actors.
Separately, President Joe Biden is expected to join United Auto Workers union members on the picket line on Tuesday in Michigan as they strike against the Big Three automakers — Ford Motor Co. F, General Motors Co. GM and Chrysler owner Stellantis NV STLA.
The housing crisis in China was back in the news, with Evergrande shares HK:3333 ending 21.8% lower as the company scrapped a debt-restructuring plan, while shares of China Aoyuan Group HK:3883 closed down by 72.5% on Monday in their first day of trading in more than a year. The Hang Seng finished 1.8% lower in Hong Kong trading.
Companies in focus
- The tentative end of the Hollywood writers strike was unable to lift media companies like Warner Bros. Discover Inc. WBD and Walt Disney Co. DIS, which each saw their shares end lower on Monday. Meanwhile, Netflix Inc. NFLX and Class A shares of AMC Entertainment Holdings Inc. AMC respectively finished 1.3% and 6.8% higher as investors embraced streaming and movie-theater chains.
- Shares of Tesla TSLA closed up by 0.9% as the electric-vehicle maker reportedly looks to build a battery factory in India.
- Amazon.com Inc. AMZN said on Monday that it would invest up to $4 billion in artificial-intelligence startup Anthropic and take a minority stake in the company to accelerate the development of its future foundation models and make them accessible to customers of its cloud business, AWS. Amazon shares finished 1.7% higher.