Stocks fell Monday as social unrest from China’s prolonged Covid restrictions weighed on markets, sending oil prices lower — after Wall Street notched gains during the Thanksgiving holiday-shortened week.
The Dow Jones Industrial Average fell more than 100 points, or 0.3%, at open. The S&P 500 and Nasdaq Composite each lost 0.5%.
Over the weekend, demonstrations broke out in mainland China as people vented their frustrations with Beijing’s zero-Covid policy. Local governments tightened Covid controls as cases surged, even though earlier this month Beijing adjusted some policies that suggested the world’s second-biggest economy was on its way to reopening.
The developments weighed on sentiment in Asia trading, with oil futures hovering around new 2022 lows around demand concerns. Shares of companies with big production facilities in the country led premarket losses. Shares of Apple lost 1.5% and Tesla declined 0.9%.
“You cannot rewire supply chain overnight,” said Mohamed El-Erian, chief economic advisor at Allianz and president of Queens’ College. “So what does it mean for those companies? It means supply uncertainty.”
The moves come after all three major U.S. indexes ended last week higher, even with the shortened trading time due to the Thanksgiving holiday. The Dow rose 1.78%, and the S&P 500 increased 1.53% during the short week. The tech-heavy Nasdaq lagged the other two indexes but was still up 0.72% in the same timeframe.
Stocks were lifted during the week by comments from Federal Reserve officials signaling that the central bank would step down its aggressive rate hike path as inflation cools. Minutes from the Fed’s November meeting confirmed the likely shift in policy.
“A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the minutes stated.
Investors will be watching this week more earnings reports and a slew of economic releases that will give further information on the state of the consumer and the U.S. economy. Intuit, Salesforce and Five Below are among companies scheduled to report earnings. Personal consumption data and the labor report for November will also be released.