Concerns over whether aggressive Federal Reserve tightening might lead to a recession triggered stocks to plunge on Monday. After capping a back-to-back weekly rise, the S&P 500 was under fire. The Federal Reserve’s potential to slow down its interest-rate increases boosted the benchmark index by 1.2% last week, extending a November rally. The Nasdaq Composite dropped 0.6% after the Dow Jones Industrial Average fell 204 points or 0.5%.
Meanwhile, American small-cap equities have shown indications that they are running out of steam towards the end of the year. It raises worries about what this might mean for risk appetite in the broader market. Even so, if history is any guide, they may be on the verge of a price increase.
In fact, since 1979, December has been the Russell 2000’s second-best month. Although tiny caps, as measured by the Russell 2000, often plunge in US midterm election years in December, the index has only declined three times out of 10 since 1982, with a little-cap gain of 0.3%.
According to Bloomberg News, Tesla Inc. decreased due to intentions of scaling back production at its Shanghai plant. WTI crude oil increased by more than $80 per barrel as China made further progress toward reopening its economy and the ban on Russian seaborne crude exports took effect.
In the US, inflation-linked Treasurys decreased in value. The interest rate on 10-year government securities climbed to 3.552%, up from 3.502% Friday. In hopes that the Fed will relax in its inflation-busting campaign due to slower consumer-price growth, it has fallen for four weeks in a row.
Asian Stocks Kick Off with Gains This Week
Hong Kong’s and mainland China’s stock markets soared. Local Chinese officials have implemented softening of Covid-19 regulations. The Hang Seng index climbed 4.5%. The Shanghai Stock Exchange increased by 1.8%.
Alibaba and Xiaomi both rose as a result of the rally. The CSI 300 Index climbed almost 2% to a six-month high since mid-September, when it was a measure of the country’s biggest listed firms.
Shanghai residents were no longer required to produce negative PCR tests before using public transportation or visiting public spaces. Some limits were lifted in Hangzhou, Alibaba’s hometown. Over the last month, investors have increasingly pointed to China’s Covid-19 regulations, resulting in significant stock rallies and minor declines.