NEW YORK (TheStreet) -- U.S. stocks were taking a hit Monday as expanding pro-democracy demonstrations in Hong Kong fueled concerns about instability in China, the world's second-largest economy. Worries about U.S. third-quarter earnings persisted as the dollar continues to strengthen on expectations of diverging monetary policy.
The Dow Jones Industrial Average
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"The proximate cause for the souring in global risk sentiment appears to be anxiety about the worsening situation in Hong Kong, and concerns that Beijing may be drawn into this impasse," explained Millan Mulraine, deputy head of U.S. research and strategy at TD Securities.
The political protest in Hong Kong was adding to the nervousness about ongoing geopolitical tensions in other hotspots around the world at a time when global economic growth momentum is weakening, said Mulraine.
Hong Kong's Hang Seng index fell nearly 2% amid violent clashes between pro-democracy protesters and police in Hong Kong.
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The U.S. dollar index was slightly lower on Monday, but remained on pace to book its best quarterly performance since the third quarter of 2008 -- at the height of the financial crisis -- according to DailyFX's chief currency strategist John Kicklighter. Kicklighter said in a research note that monetary policy contrast is currently working in the dollar's favor. While the timing and pace for the Federal Open Market Committee's return to rate hikes is up for debate, even a period of basing would outweigh the active growth in accommodation by the Federal Reserve's three largest counterparts: the European Central Bank, the Bank of Japan, and the People's Bank of China, he said.
"Throw in upcoming disappointing Q3 earnings from S&P 500 multinational corporations due to currency instability and you get a U.S. stock market that stands on a fault line," added Michael Pento, president and founder of Pento Portfolio Strategies.