Stocks finished sharply lower Monday as concerns of slowing growth and accelerating coronavirus infections, along with the potential collapse of property developer China Evergrande, gripped global markets ahead of a crucial Federal Reserve policy meeting later this week.
The Dow Jones Industrial Average finished down 614 points, or 1.78%, to 33,970, after falling as much as 972 points, while the broader S&P 500 dropped 1.70%, and the tech-heavy Nasdaq fell 2.2%.
The benchmark 10-year note yields slipped to 1.316%
China's recent crackdown on corporate profiteering has rattled investors both in the Asia region and elsewhere, raising serious concerns over the fate of China Evergrande (EGRNF) , which faces a $150 million in bond payments later this week as its shares plunge to the lowest levels in more than a decade and officials in Beijing refuse to commit any rescue cash to the indebted property developer.
The risk of contagion from an Evergrande collapse pulled stocks in Hong Kong lower and pulled global stocks to the lowest levels in more than a month.
Jamie Cox, Managing Partner for Harris Financial Group, said "we are in an information vacuum at the moment."
The Evergrande situation, although big and impactful, isn't the reason for this selloff," he said. "Rather, stalemates in Congress on the debt ceiling, worries on policy changes or mistakes in monetary policy, and a litany of proposed tax increases have dampened the mood for investors."
When this occurs, Cox said, corrections happen.
Steel and iron ore stocks fell in overnight trading as concerns that a potential Evergrande default could imperial building and growth prospects in the world's second-largest economy, with U.S.-based Cleveland Cliffs (CLF) - Get Cleveland-Cliffs Inc Report slumping 10%.
WTI crude oil fell 2% to $70.50
"While the Evergrande situation is front and center, the reality is, stock market valuations are overstretched and the market has enjoyed too long of a break from volatility and Monday's stock market declines are not surprising," said David Bahnsen, chief investment officer at The Bahnsen Group. "Markets have been priced to perfection for a long time and in this September lull that seems to be quite seasonal throughout history, markets are dealing with the thing they hate most – uncertainty."
Pfizer (PFE) - Get Pfizer Inc. Report finished slightly higher after announcing release of data indicating that its coronavirus vaccine is safe and effective when administered to children between the ages of 5 and 11 in lower doses.
President Joe Biden's chief medical adviser, Dr. Anthony Fauci, added Sunday that Moderna (MRNA) - Get Moderna, Inc. Report and Johnson & Johnson (JNJ) - Get Johnson & Johnson (JNJ) Report are just a few weeks away from having enough data available for the FDA to decide on the suitability of booster shots for their coronavirus vaccines as well.
DR Horton Group (DHI) - Get D.R. Horton, Inc. Report shares fell after the homebuilder trimmed its full-year sales forecast owing to 'significant' disruptions in supply chain and labor markets.
Natural gas remained in focus Monday, particularly in Europe, where record high prices are prompting policy responses from London to Berlin as officials worry that further increases could hold back growth prospects -- and intensify supply chain disruptions -- heading into the winter months.
Kwasi Kwarteng, the U.K. Secretary of State for Business, Energy and Industrial Strategy, said there is "no question of the lights going out" this winter as a result the huge rise in gas prices, the BBC reported.
"The current global situation may see more suppliers than usual exiting the market but this is not something that should be any cause for alarm or panic," he said