Chinese retail sales slowed down in July.
AFP via Getty ImagesIn a messy day for markets with plenty of headlines but little in the way of logical price action, the tech-heavy Nasdaq continued to lag behind the broader stock market.
The week kicked off with U.S. stocks tumbling from last week’s historic highs as Wall Street weighed geopolitical concerns alongside global economic data. Top of mind for investors was the worsening situation in Afghanistan, signs of a slower economic recovery in China, and a report that the Federal Reserve could begin to pull back some of its support soon.
But in midday trading, the Dow Jones Industrial Average and S&P 500 recovered earlier losses and turned positive while the Nasdaq Composite remained in the red, down 0.4%. The 10-year Treasury yield fell to 1.259%.
Chinese data released Monday showed that both factory output and retail sales slowed down in July, compared with June, and came in below analysts’ expectations. The results dominated market sentiment and dragged Asian markets down as well as the Nasdaq.
“The Chinese data overnight is going to feed into the near-term uncertainty in the country as it desperately tries to get its Covid outbreak under control early,” Craig Erlam, senior markets analyst at OANDA, wrote Monday.
Investors are also watching as the Taliban seize power in Afghanistan. On Sunday, the Taliban entered Kabul after President Ashraf Ghani left the country. The U.S. sent additional troops to assist in the chaotic evacuation of Westerners from the capital city.
“For [President] Biden, the developments in Afghanistan have created some unwelcome headlines just as further progress was being made on his economic agenda,” said Deutsche Bank’s Jim Reid, referencing the Senate passage of the bipartisan infrastructure bill last week.
The events in Afghanistan are a “political negative for Biden which could hurt the chances any infrastructure bill is passed,” wrote The Seven Report’s Tom Essaye.
President Biden is set to address the nation at 3:45 p.m. ET.
Eyes will be on the Federal Reserve this week as minutes from its July meeting are set to be released Wednesday. The Journal reported Monday that Fed officials were considering ending asset purchases by the middle of next year. The Fed would begin pulling back on its bond-buying in the next three months, the report said, paving the way for the Fed to begin raising interest rates.
The fast-spreading Delta variant of the coronavirus that causes Covid-19 once again contributed to the gloom in Monday’s trading, with investors fearing governments in Asia might resort to more and tighter restrictions to fight the pandemic.
“Consumers in advanced economies rushed to spend savings as restrictions eased. In China there has been an increased desire to save in the wake of Covid,” noted UBS chief economist Paul Donovan.
Globally, oil and mining stocks were down roughly 1% on all of the Chinese news, and stocks of companies most dependent on the Chinese market were among the top decliners—such as luxury group LVMH Moët Hennessy Louis Vuitton (ticker: LVMH.Italy), down 2.1%, or Gucci owner Kering (KER.France), down 4.7%.
Here are some other stocks on the move Monday:
French car parts supplier Faurecia (EO.France) jumped more than 12% after it agreed to acquire a majority stake in German automotive lighting group Hella.
Airline Lufthansa (LHA.Germany) was down by nearly 4% after the German government said it would sell up to a fourth of its 20% stake in the company.
T-Mobile US (TMUS) fell 3% after revealing a data breach.
CureVac (CVAC) gained 3.5% after the company and its partner GlaxoSmithKline said preclinical study on a Covid vaccine in animals performed well. Glaxo stock gained 0.2%
NIO (NIO) dropped 5.6% after reports that a passenger died in an accident while using the company’s autopilot feature.
Sonos (SONO) jumped 7.5% after a jury ruled that Alphabet’s (GOOGL) Google had infringed on its patents. Alphabet stock declined 0.2%.
Tencent Music Entertainment Group (TME) slipped 8% after delaying its Hong Kong IPO.
Write to Carleton English at carleton.english@dowjones.com, Pierre Briançon at pierre.briancon@dowjones.com and Ben Levisohn at ben.levisohn@barrons.com
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