Here are the most important news, trends and analysis that investors need to start their trading day:
- Dow set to drop nearly 700 points in global market sell-off
- Evergrande troubles could spread beyond China
- Yellen issues new call for increasing debt ceiling
- Bond yields, oil, cryptocurrencies under pressure
- Pfizer says Covid vaccine safe, works for kids 5 to 11
1. Dow set to drop nearly 700 points in global market sell-off
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Global stock markets tumbled Monday, with Dow futures' decline of nearly 700 points, or nearly 2%, leading the way lower in the United States. A number of emerging investment risks led to the widespread selling.
- Hong Kong's Hang Seng Index dropped more than 3% overnight on concern about a possible market contagion stemming from embattled Chinese property developer Evergrande Group, which is teetering on bankruptcy. European stocks also sank as Wall Street followed.
- Investors were already concerned about the seasonably rough month of September and the historical trend of the back half of the month being especially weak. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq fell Friday and for all of last week.
- The Federal Reserve's two-day September policy meeting, which starts Tuesday, is also a wild card for markets. Central bankers are considering when to begin tapering bond purchases against a backdrop of elevated inflation and a recovering economy. Fed Chairman Jerome Powell has maintained that rising prices pressures will be temporary.
2. Evergrande troubles could spread beyond China
With Evergrande on the brink of collapse, analyst are warning the potential fallout could have far-reaching implications beyond China. After expanding rapidly for years and snapping up assets as China's economy boomed, Evergrande is now snowed under a crushing debt of $300 billion. Evergrande, the owner of more than 1,300 real estate projects in over 280 cities in China, said its escalating troubles could lead to broader default risks.
3. Yellen issues new call for increasing debt ceiling
U.S. Treasury Secretary Janet Yellen issued another plea to Congress to raise the federal debt ceiling. In a Wall Street Journal op-ed Sunday, Yellen said failure to do so would lead to a first-ever U.S. default and a historic financial crisis that would compound the damage from the Covid pandemic. Yellen, chair of the Fed before Powell, said last week that the Treasury would exhaust its emergency efforts to make payments on debt already incurred sometime in October.
4. Bond yields, oil, cryptocurrencies under pressure
The intersection of all these worrisome factors led investors to sell stocks and risk assets and buy bonds. The 10-year Treasury yield, which moves inversely to price, dropped Monday to around 1.31%. U.S. oil prices fell 2% on Monday. Bitcoin, which has seen some recent strength after a summer sell-off to below $30,000, dropped 10% on Monday. The world's biggest cryptocurrency traded under $43,000 in early trading. It hit an all-time high over $64,000 in April.
5. Pfizer says Covid vaccine safe, works for kids 5 to 11
Pfizer and BioNTech said Monday their Covid vaccine is safe and generates a "robust" immune response in a clinical trial of kids 5 to 11. The companies tested a two-shot regimen of about a third the dosage used for adolescents and adults administered three weeks apart. Pfizer and BioNTech will submit their findings to the FDA and other U.S. regulators "as soon as possible." The New York Times reported vaccinations for the younger kids could begin as soon as Halloween.
The FDA is expected to issue a decision sometime this week on which groups are eligible to get a third dose, or booster shot, of the Pfizer's Covid vaccine. An FDA advisory committee Friday unanimously recommended Pfizer booster shots for people 65 and older and other vulnerable Americans. The panel voted against boosters for the general public at this time. Pfizer and BioNTech shares were lower in Monday's premarket downdraft.