US stocks are slipping on Monday, as losses to major banks are pulling S&P 500 off the record levels they set at the end of last week. S&P 500 is also the Dow Jones Industrial Average.
At 12:12 pm East time, the S&P 500 was 0.6 % lower At 32,965 points, the average industrial size of Dow Jones decreased by 107 or 0.3% and the composite of Nasdaq was 1.1% lower.
In concern about how much big banks will suffer after soiled trading by a major hedge fund, financial stocks have fallen to some of the market’s sharpest losses. Energy producers’ stocks have also been weak as crude oil prices have decreased. Stocks of technology also fell widely as China announced further tax breaks to strengthen its chip industry. The Facebook and other heavyweights market gains contributed to the reduction in the losses of the S&P 500.
The majority of stocks on Wall Street were falling, while Treasury yields were slightly rising. The VIX index, which shows how much volatility traders are expecting from the S&P 500, went up 12%, but it remains close to its lowest level since the pandemic rocked markets a year ago.
Tom Martin, senior portfolio manager at global alt investments, said that ‘It’s high, that means people are very nervous, but it is not panicky.
The changes are the latest ebb for Wall Street, which has been climbing in fits and starts for the past few months. Rising expectations of a supercharged economic recovery are bolstering the market, thanks to Covid-19 vaccinations, massive government spending, and the Federal Reserve’s continued low rates. Worries about a coming rise in inflation, as well as possible over-ebullient prices across the market, are weighing on stocks at the same time.
This week will see many important economic reports that will help determine whether stocks are deserving of their current high valuations. The jobs report on Friday is expected to show a significant increase in hiring, according to economists.
President Joe Biden will also discuss his plan to rehabilitate roads, bridges, and other infrastructure on Wednesday. Raw-materials producers’ stock has recently risen on rising expectations for increased infrastructure spending by Washington, despite the fact that many previous presidential administrations have failed to do so.
On Monday, however, the market’s focus was squarely on financial firms after Japanese bank Nomura Holdings and Swiss bank Credit Suisse announced that they are facing potentially significant losses as a result of their dealings with a major client, though the exact amount is still unknown.
The claim against Nomura’s client could be worth as much as $2 billion, according to Nomura.
Credit Suisse said it is exiting trades with a major U.S. hedge fund that defaulted on a “margin call” last week. When a broker tells a client that they need to put up cash after borrowing money to make trades, this is known as a margin call. The client was not named by Credit Suisse or Nomura, but news reports identified it as New York-based Archegos Capital Management.
Credit Suisse and Nomura both saw their shares fall by at least 16 % in their home countries, and US banks were caught up in the downdraft as investors pondered whether the sour trades would remain isolated or have a broader impact across the system.
“This is an example of hidden leverage,” says the author, “Martin remarked. “We all know there’s a lot of debt floating around, but we don’t know how much of it is floating around.”
Morgan Stanley was down 3.5 % and financial stocks in the S&P 500 were down 1.2 % making it one of the index’s worst-performing sectors.
As the price of US crude oil fell slightly to $60.96 per barrel, energy stocks in the S&P 500 fell 1.3 percent. Brent crude dropped 0.1 percent to $64.35 per barrel, the international benchmark.
Boeing gained 2.4 % after Southwest Airlines announced a 100-plane order for the 737 MAX. After being grounded worldwide in 2019 due to two crashes that killed 346 people, regulators in the United States and other countries have cleared the plane model to fly again.
The 10-year Treasury yield increased to 1.68 % late Friday from 1.66 %.
The German DAX gained 0.5 %, while the French CAC 40 gained 0.5 % on European stock exchanges. The London Stock Exchange’s FTSE 100 index fell by 0.1%.
The Nikkei 225 in Japan rose 0.7 % the Kospi in South Korea fell 0.2 % and the Hang Seng in Hong Kong remained virtually unchanged. Shanghai’s stock market increased by 0.5%.
