Wall Street stocks fell on Monday, continuing their losses from last week as investors braced for the start of another US corporate earnings season, set against a darkening economic backdrop.
The broad S&P 500 gauge closed down 0.8 per cent in New York.
The technology-focused Nasdaq Composite fell 1 per cent, with the Philadelphia Semiconductor index dropping 3.5 per cent after Washington launched new export controls to restrict Beijing’s plans for technological self-sufficiency. The restrictions limit the sales of semiconductors made with US technology, unless vendors obtain an export licence.
The declines in US equities on Monday followed a sell-off on Wall Street in the previous session. The S&P closed down 2.8 per cent on Friday after a labour market report pointed to persistently strong jobs growth.
Such data have been scrutinised in recent months for clues about how aggressively the Federal Reserve will raise interest rates, with signs of continuing robustness in the labour market fuelling expectations of tighter monetary policy.
Monday’s downbeat trading activity also came ahead of a flurry of third-quarter corporate earnings announcements, with Wall Street banks poised to lead the charge.
Investors will analyse companies’ financial statements for evidence of stress from stubbornly high inflation and rising borrowing costs, with fears intensifying this year that central banks will hoist interest rates into a recession — putting businesses across many sectors under even more strain.
US inflation data on Thursday will also shed light on the effectiveness of the Fed’s tightening efforts after the central bank raised interest rates by an extra-large 0.75 percentage points over three consecutive meetings. A Reuters poll puts the consumer price index for the world’s largest economy at 8.1 per cent for September on an annual basis, compared with 8.3 per cent in August.
The US Treasury market was closed on Monday for a holiday. UK government bonds came under acute pressure across all maturities, even after the Bank of England announced measures to ease strains on UK pension funds, including an increase to the limits on purchases within its emergency gilt-buying programme.
The central bank had stepped in to ease volatile trading in gilts after the UK government’s “mini” Budget last month triggered historic price swings in the debt instruments — particularly in longer-dated bonds. The initiative is due to end on Friday.
The yield on the 10-year UK government bond added 0.22 percentage points on Monday to 4.46 per cent, while the 30-year yield added 0.29 percentage points to 4.68 per cent. Bond yields rise as their prices fall.
“There’s a lot of focus on the fact that gilt purchases will indeed end at the end of this week,” said Antoine Bouvet, a rates strategist at ING. “The underlying fear is that the facility hasn’t been used much by pension funds — there are fears that there might be more selling once the purchases end.”
Elsewhere in equity markets, Europe’s Stoxx 600 ended the day down 0.4 per cent. Hong Kong’s Hang Seng had earlier closed down 3 per cent, while China’s mainland CSI 300 gauge dropped 2.2 per cent. Overall, Chinese chipmakers shed $8.6bn in market value on Monday after Washington announced its new export controls.
Additional reporting by Hudson Lockett in Hong Kong
