The stock market is trading in a mixed fashion to start the week, trying to maintain last week’s rebound momentum while grappling with rising Treasury yields (10-yr +5 bps to 4.26%), economic slowdown concerns, and a dislocation in stocks of Chinese companies with U.S. listings.
The latter are being sold hard today after Xi Jinping secured an unprecedented, third five-year term to serve as China’s leader. That wasn’t surprising, but it did come as a shock to many investors that he managed to surround himself only with loyalists who are apt to help him pursue tighter regulations and the continuation of China’s zero-Covid policy.
Hong Kong’s Hang Seng plunged 6.4%, and stocks like Alibaba (BABA 61.35, -10.83, -15.0%) and Pinduoduo (PDD 42.80, -16.17, -27.4%) are suffering outsized losses in U.S. trading. Other stocks with a strong business presence in China, like Wynn Resorts (WYNN 54.42, -4.38, -7.5%), Las Vegas Sands (LVS 33.91, -5.16, -13.2%), Tesla (TSLA 204.07, -10.37, -4.8%), and Starbucks (SBUX 83.95, -4.66, -5.3%), are also feeling the pinch of concerns related to Xi’s power grab.
Still, the broader market is holding up reasonably well as market participants remain drawn to the notion that the Fed could soon communicate a less aggressive rate-hike bias. That notion is fostering a sense that the end of the rate-hike cycle could be approaching, which is the first step to eventually lowering rates, although no Fed official is suggesting a rate cut will happen anytime soon.
Some weak preliminary Manufacturing and Services PMI data for October from IHS Markit supported the thinking that the Fed might be inclined to take a less aggressive rate-hike approach in December and beyond.
Other considerations today include the specter of earnings results this week from the mega-cap leadership stocks, reports that Rishi Sunak will be the UK’s next prime minister, and word that the DOJ will hold a press conference at 2:00 p.m. ET to address a “significant national security matter.”
Today’s best-performing sectors are the health care (+1.7%), consumer staples (+1.1%), industrials (+0.9%), and financial (+0.9%) sectors.
The Dow Jones Industrial Average is up 0.9%; the S&P 500 is up 0.6%; the Nasdaq Composite and Russell 2000 are down 0.2%.
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