US stocks gave up or pared Monday morning gains as investors monitored Russia-Ukraine talks and a COVID lockdown in China, while awaiting this week’s Federal Reserve decision.
What’s happening?
-
The Dow Jones Industrial Average DJIA,
-0.07%
was up 210 points, or 0.6%, at 33,154 after rising more than 400 points earlier on Monday. -
The S&P 500 SPX,
-0.84%
fell 2 points, or 0.1%, to 4,202. -
The Nasdaq Composite COMP,
-2.16%
dropped 1.1%, or 148 points, to around 12,696.
The Dow fell 2% last week for its fifth straight weekly decline, while the S&P 500 has dropped four of the last five weeks and is down 12% from its record close established just after the new year.
Read: ‘Unprecedented territory’: Stocks slump on Russia-Ukraine war as jittery investors watch for Fed to start hiking rates amid high market volatility
What’s driving markets?
A fourth round of talks between Ukraine and Russia was held after a weekend in which Russia pounded a military training base near the border with Poland, killing at least 35 people. Russia continued its offensive on Monday throughout Ukraine.
An adviser to Ukraine President Volodymyr Zelensky said Monday afternoon that talks between Moscow and Kyiv had paused and would resume on Tuesday, The Wall Street Journal and others reported.
“Financial markets have turned into one gigantic ‘war trade’ in recent weeks. Politics has overshadowed economics, with most assets driven entirely by the conflict in Ukraine,” said Marios Hadjikyriacos, senior market analyst at XM, in a note.
“This phenomenon is on full display today after negotiators on both sides signaled progress in the latest peace talks and kept the door open for a cease-fire soon,” the analyst wrote.
US and Chinese security officials met in Rome on Monday as the US alleged that Russia was seeking military equipment from the world’s number-two economy.
Meanwhile, the head of the International Monetary Fund said Sunday that she expects a “deep recession” in Russia due to “unprecedented” sanctions by the West after its invasion of Ukraine, and that a Russian sovereign default remains a possibility.
In an interview with CBS News’ “Face the Nation,” IMF Managing Director Kristalina Georgieva said that she no longer saw a Russian debt default as an “improbable event.”
Separately, China locked down the key southeastern manufacturing hub of Shenzhen as it also combats a COVID outbreak in the northeast of the country. The Chinese lockdowns have the potential to further exacerbate supply-chain woes with inflation already running at nearly 8%.
The Tell (Jan. 3): Failed China ‘zero-COVID’ policy tops list of 2022 geopolitical risks: Eurasia Group
The backdrop of uncertainties has forced strategists to lower their outlook for equities. Those at Goldman Sachs lowered their year-end price target for the S&P 500 to 4,700 from 4,900, citing the surge in commodities prices and the weaker outlook for US and global growth. On Friday, Goldman’s economists cut their GDP forecast and said the odds of a US recession next year were as high as 35%.
Still ahead for this week is the US central bank’s policy gathering, set to kick off on Tuesday. The Federal Reserve is expected to raise interest rates for the first time since 2015-2018 on Wednesday in response to surging inflation.
Which companies are in focus?
- IEP Utility Holdings LLCa unit of Icahn Enterprises LP, is raising the tender offer price for Southwest Gas Holdings Inc.. SWX to $82.50 a share in cash from a previous price of $75 a share. Southwest Gas shares were up 4.7% near $76 a share.
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US-listed shares of Alibaba Group Holding Ltd.. BABA sank 7.7% as the China-based e-commerce giant continues to suffer from a broad selloff in China’s stock market amid the threat of delisting of shares of China-based companies in the US
What are other assets doing?
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The 10-year benchmark Treasury note yield BX:TMUBMUSD10Y rose above 2.1%, touching its highest since July 2019, up from 2% Friday afternoon. Treasury yields and prices move in opposite directions.
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The ICE US Dollar Index DXY,
-0.32% ,
a measure of the currency against a basket of six major rivals, was down 0.3%. -
Oil futures retreated, with the US benchmark CL.1,
-6.05%
down 7% at $101.73 a barrel. Gold futures GC00,
-1.13%
fell 1.4% to $1,957.90 an ounce. -
BitcoinBTCUSD,
-0.01%
pink 7% to around $39,000. -
The Stoxx Europe 600 SXXP,
+1.20%
rose 1.4%, while London’s FTSE 100 UKX,
+0.53%
gained 0.8%. -
Japan’s Nikkei 225 NIK,
+0.58%
closed up by 0.6% on Monday. Meanwhile, the Hang Seng Index HSI finished 5% lower, while China’s Shanghai Composite Index SHCOMP,
-2.60%
closed down by 2.6%.
— William Watts and Steve Goldstein contributed to this article.
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