Stocks Lower on Chinese Covid Concerns

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.55%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.90%.  

Stocks are lower this morning on fears of fresh Chinese lockdowns after the first Chinese Covid death in almost six months was reported on Saturday, and two more deaths were reported on Sunday.  China reported 23,238 new Covid infections on Saturday, down slightly from Friday.

 

Stocks are also being undercut by renewed fears of a railroad strike in two weeks after one of the largest railroad unions voted down the deal proposed by the White House.  The SMART Transportation Division, the union representing rail conductors, announced Monday that it voted down the deal.  By contrast, the Brotherhood of Locomotive Engineers and Trainmen on Monday announced they voted to ratify the deal.  In recent weeks, seven of 12 railroad unions approved the deal, but three unions have rejected their contracts.  Railroad workers would be allowed to strike beginning at midnight on December 5.  Still, Congress has the power to intervene with legislation to prevent a strike.

Stocks are also being undercut after Goldman strategists delivered a bearish stock view in a note Monday by saying, “The conditions that are typically consistent with an equity trough have not yet been reached.” The strategists said that a peak in interest rates and recession-level valuations are necessary for a sustained stock-market recovery.  They said, “The near-term path for equity markets is likely to be volatile and down.”

Bitcoin (^BTCUSD) is down -3%, adding to Sunday’s drop of -2.4% and contributing to today’s risk-off atmosphere. 

In a supportive factor, the 10-year T-note yield this morning is down -2 bp at 3.81%.  The 10-year yield is trading at a comfortable half-percentage-point below the mid-October 15-year high of 4.34%.

Overseas stocks are mostly lower today, causing carry-over weakness for U.S. stocks.  The Euro Stoxx 50 index today is down -0.46%.  China’s Shanghai Composite closed down -0.39%, but Japan’s Nikkei Stock Index closed up +0.16%. 

Today’s stock movers…

Disney (DIS) is up +7% after the surprise news that Bob Iger will come back as CEO for a 2-year term while the board looks for a permanent replacement for former CEO Bob Chapek.  The Disney board is responding to disappointing earnings results and losses at the Disney+ streaming service.

Energy stocks are weighing on the broad market due to today’s sharp -4.4% sell-off in WTI crude oil prices. Oil prices are lower on Chinese Covid fears and a Wall Street Journal report that OPEC+ is discussing an output increase of +500,000 bpd ahead of the EU’s embargo of Russian oil.  Energy stocks:  Exxon (XOM) -3.7%, Marathon Oil (MRO) -7.2%, Valero Energy (VLO) -3.6%, Haliburton (HAL) -8.3%, Schlumberger  (SLB) -7.7%.

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