US equities lost ground in early trading Monday and retreated from records after China took a series of steps that pointed to further tensions between the world’s two largest economies.
Investors also prepared for a meeting of Federal Reserve policymakers. A flurry of corporate earnings reports, including results from Big Tech heavyweights, are also in the pipeline this week and could lead the way, analysts say.
What do large indexes do?
The Dow Jones Industrial Average DJIA,
fell by 64.10 points or 0.2% to 34,997.45.
The S&P 500 SPX,
fell 1.29 points, less than 0.1%, to 4,410.50.
The Nasdaq Composite COMP,
lost 10.68 points, or 0.1%, to trade at 14,826.31.
The drop came after a week in which the US benchmarks bounced sharply from a July 19 tumble to end in records on Friday. The S&P 500 rose 2% on Friday to end at the 2021 record 40, and the tech-heavy Nasdaq Composite was up 2.8%. The Dow also hit a record Friday, finishing above the 35,000 milestone for the first time.
What drives the market?
A softer tone in global equity markets has been linked to China as the Hang Seng HSI,
slipped more than 4%, following a crackdown on both Tencent’s music licenses and the entire tutoring industry. In premarket trading, Tencent Music Entertainment TME,
shares fell 14% after China ordered the company to end exclusive contracts with music copyright holders.
Hong Kong-listed education stocks have plunged after educational institutions were banned from raising money in the stock market and unable to invest foreign capital. The crackdown hit US-listed Chinese education stocks on Friday.
The crackdown came as China blamed the US for a stalemate in bilateral relations as high-level talks began in the Chinese city of Tianjin.
But gains may soon be back in the spotlight. with results expected this week from major tech companies, including: Alphabet Inc.
and Microsoft Corp.
“The earnings season is now in full swing and continues to surprise positively so far as most companies report better-than-expected top and bottom-line results,” said Peter Cardillo, chief economist at Spartan Capital Securities, in a note. .
“Despite the ‘fear factor’ of the virus and ongoing inflation that can sometimes cause minor hiccups, we see the summer rally continuing with indices potentially up another 5%,” he said.
US earnings calendar includes electric vehicle manufacturer Tesla Inc.
which reports Monday after closing time. This week will also see the Federal Reserve’s latest interest rate decision and its second-quarter gross domestic product report.
jumped Monday after Amazon placed an ad looking for a person to lead the retailer’s cryptocurrencies effort. A separate report said Amazon wanted to start accepting bitcoin for payment by the end of the year.
Which companies take center stage?
Shares of Hasbro Inc.
rose more than 9% after the toy maker reported second-quarter adjusted earnings that were more than double what was expected, with sales boosted by strength in franchise brands and Wizards of the Coast and digital gaming.
and Willis Towers Watson PLC
announced a reciprocal agreement on Monday to terminate their $30 billion merger agreement and end lawsuits with the US Department of Justice. Aon shares rose 6.5%, while Willis Towers Watson lost 5.5%.
Popular meme stock AMC Entertainment Holdings Inc.
rose 2.5%, while GameStop Corp.
decreased by 0.6%.
What are other markets doing?
The return on the 10-year Treasury TMUBMUSD10Y,
decreased by 1.2 basis points to 1.268%. Yields and bond prices move in opposite directions.
The ICE US Dollar Index DXY,
a measure of the currency against a basket of six major rivals, fell 0.1%.
Oil futures traded lower, with US benchmark CL00,
down 0.7%, while gold futures GC00,
were slightly lower.
In European equities, the Stoxx Europe 600 SXXP,
and the London FTSE 100 UKX,
each decreased by 0.1%.