U.S. equity futures were trading mixed a day after worries about spreading contagion from troubles in China’s property market smashed an extended streak of calm in the stock market and sent the S&P 500 toward its worst day since May.
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$33970.47
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$14713.902994
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On Monday, U.S. stocks logged their biggest drop since May, with the tech-heavy Nasdaq composite sinking 2.2%.
The S&P 500 tumbled 1.7% on Monday to 4,357.73, its biggest drop since May. The S&P 500 was coming off two weeks of losses and is on track for its first monthly decline since January.
The Dow Jones Industrial Average fell 1.8% to 33,970.47. The Nasdaq shed 2.2%, to 14,713.90. The Russell 2000 dropped 2.4% to 2,182.20.
Technology companies led the broader market lower. Apple fell 2.1% and chipmaker Nvidia dropped 3.6%.
Airlines were among the few bright spots. American Airlines rose 3% to lead all the gainers in the S&P 500. Delta Air Lines rose 1.7% and United Airlines added 1.6%.
“What’s happened here is that the list of risks has finally become too big to ignore,” said Michael Arone, chief investment strategist at State Street Global Advisors. “There’s just a lot of uncertainty at a seasonally challenging time for markets.”
The worries over Chinese property developers and debt have recently centered on Evergrande, one of China’s biggest real estate developers, which looks like it may be unable to repay its debts.
Those property companies have been big drivers of the Chinese economy, which is the world’s second-largest.
If they fail to make good on their debts, the heavy losses taken by investors who hold their bonds would raise worries about their financial strength. Those bondholders could also be forced to sell other, unrelated investments to raise cash, which could hurt prices in seemingly unrelated markets.
It’s a product of how tightly connected global markets have become, and it’s a concept the financial world calls “contagion.”
Many analysts say they expect China’s government to prevent such a scenario, and that this does not look like a Lehman-type moment. Nevertheless, any hint of uncertainty may be enough to upset Wall Street after the S&P 500 has glided higher in almost uninterrupted fashion since October, leaving stocks looking expensive and with less room for error.
On top of those worries, investors are watching to see if the Federal Reserve might ease off the accelerator on its support for the economy. And heavy government spending to counter the impact of the…
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