US open: S&P 500 nears two-month low as risk appetite wanes
Stocks were mixed on Friday in New York as ongoing concerns about a growing debt crisis in China hit sentiment and dampened risk appetite.
By mid-morning trade, the Dow was up 0.1% at 34,506, the S&P fell 0.2% to 4,364, while the Nasdaq slipped 0.5% to 13,247. The S&P 500 was extending losses after closing Thursday’s session at its lowest level since late-June.
“This week’s market weakness has been primarily driven by Asia markets, the Hang Seng finishing the week down 5.9% and closing in bear market territory,” said analyst Michael Hewson from CMC Markets. “Combined with the likelihood of persistently higher yields after the publication of this week’s Fed minutes, and markets look set to post their worst week since March.”
China, bond yields in focus
China Evergrande, the heavily indebted property group and once the country's second developer, has filed for chapter 15 bankruptcy in New York – allowing it to protect its assets in the US as it works to restructure debt and renegotiate with its creditors.
The Guangzhou-based group, which is thought to hold over $300bn in debt, defaulted on its repayments back in 2021, prompting a string of defaults at other building companies.
The latest news – just days after Country Garden told investors it could register a loss of $7.6bn in the first half of 2023 as it struggles to make its own bond repayments – will raise concerns about contagion to the wider financial services sector.
Meanwhile, US Treasury yields were coming back down after strong gains on Thursday, when 10-year yields hit a 15-year high and 30-year yields reached a decade high. Stronger-than-expected economic data earlier in the week have prompted fears about further tightening of monetary policy.
Stock option contracts with a notional value of $2.2trn will expire today, according to Dow Jones, and so trading is expected to be relatively volatile.
Technology stocks out of favour
“Tech stocks have been especially sensitive to the recent rise in yields with Apple shares on course for their worst run of weekly losses this year, down for the third week in a row, while Microsoft shares are on course for the fifth successive weekly fall,” CMC's Hewson said.
Shares in Keysight Technologies dropped despite the electronic design and test solutions company beating forecasts with third-quarter earnings after the bell the previous day, as it disappointed investors with a weak forecast for the fourth quarter.
Cloud software group Bill Holdings also fell on weaker-than-expected guidance for its fiscal first quarter. Fourth-quarter losses were less than expected, however.
Meanwhile, agricultural equipment giant Deere & Co smashed expectations with its third-quarter results and raised its guidance for full-year earnings – but the stock was posting heavy losses in morning trade.