NEW YORK (AP) — Global stocks fell on Tuesday as a slump in China’s recovery sparked concerns for the rest of the global economy.
Data showed the S&P 500 fell 1% in morning trading. The world’s second-largest economy experienced a deep recession in July. As of 10:30 a.m. ET, the Dow Jones Industrial Average fell 311 points, or 0.9 percent, to $34,996, while the Nasdaq Composite fell 1 percent.
Earlier this year, hopes were high that China’s economy would thrive well after the government lifted coronavirus restrictions to prop up a world economy weakened by high inflation. But China’s economic recovery has been so sluggish that it unexpectedly cut its key interest rate on Tuesday and omitted a report on unemployment among young workers.
Concerns over spillovers to the rest of the global economy weigh heavily on Wall Street, and stocks have already fallen in August. The backlash follows Gangbuster’s first seven months of the year, which critics called overkill.
So far in the US, the economy has remained more resilient than expected despite rising interest rates. A report on Tuesday showed U.S. retail sales growth accelerated in July than economists expected.
“U.S. retail sales are forward-looking, and a lot of that could be on charge cards,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Yet, U.S. consumers are showing little signs of slowing down.”
Strong U.S. consumer spending is helping to shield the economy from a long-predicted recession. This level has been maintained as the job market remains strong despite the weight of significantly higher interest rates.
While a strong retail sales report raises hopes for the U.S. economy, it could also increase the Federal Reserve’s resolve to keep interest rates high to keep inflation under control. The Fed has already raised key rates to their highest levels in more than 20 years, and high interest rates act as a blatant drag on the economy as a whole.
“Numbers like today suggest that rates will stay high for a long time even if the Fed doesn’t raise rates next month,” said Mike Lowengart, head of model portfolio construction at the Morgan Stanley Global Investment Office. It just makes it more likely,” he said.
U.S. Treasury yields initially rose on the report of retail sales, approaching the highest levels since the 2007-09 global recession, but then fell.
A weaker Chinese economy could mean less demand for oil and other commodities.
US oil prices fell 2.4% per barrel to $80.51. Prices of international standard crude oil Brent and copper also fell.
The drop means energy and raw material producers have seen the biggest losses in the S&P 500 index. Minor Freeport McMorran shares fell 3.7%, while Exxon Mobil shares fell 1.9%, making it one of the biggest weights in the index.
Banks were also in trouble, following a string of high-profile failures in the spring, partly due to rising interest rates.
Small and medium-sized banks have come under the most scrutiny from investors and credit rating analysts, with Keycorp, Comerica, Citizens Financial Group and Ziones Bancorp all down at least 3.8% and among the largest in the S&P 500. suffered losses.
Elsewhere on Wall Street, more reports of better-than-expected corporate earnings helped cap losses in the market.
Home Depot jumped 0.5% in response. Exceeded expectations Both earnings and profits are strong, but we are feeling the impact of rising interest rates. Home improvement retailers said they are under continued pressure for some types of large projects.
After Warren Buffett’s policies, homebuilder stocks have been oscillating between rising and falling. Berkshire Hathaway reveals it has bought multiple shares One of them. Other investors often try to imitate the big name’s move, with DR Horton gaining 0.4%.
In overseas stock markets, the index fell in Europe after falling 1% in Hong Kong and 0.1% in Shanghai.
The pressure is showing up all over the world. Also on Tuesday, Russia’s central bank raised key lending rates as an emergency measure against a strong ruble after the crash. currency has reached its lowest price From the beginning of the war with Ukraine. Data show workers’ wages are growing at a fast pace in the UK, which threatens to put upward pressure on already high inflation.
Japanese stocks were an exception. The Nikkei Stock Average jumped 0.6% after Japan reported unexpectedly strong economic growth in the spring.
In the bond market, the 10-year Treasury yield fell to 4.18% from 4.20% late Monday. Helps set interest rates for mortgages and other important loans.
Closer to the Fed’s expectations, the two-year yield fell to 4.92% from 4.97%.
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AP Business reporters Joe McDonald and Matt Ott contributed to this report.