U.S. stock futures began the week deeply in the red as investors continued to move to the sidelines in September amid several emerging risks for the market.
Futures on the Dow Jones Industrial average lost 640 points, or 1.9%. S&P 500 futures fell 1.6%. Nasdaq 100 futures dropped 1.5%.
There were a number of reasons for the sell-off:
- Investors fear a contagion sweeping financial markets from the troubled China property market. Hong Kong equities saw a big sell-off during the Asia trading session on Monday. The benchmark Hang Seng index plunged 4% with embattled developer China Evergrande Group on the brink of default.
- The Federal Reserve begins a two-day meeting Tuesday and investors are worried the central bank will signal it’s ready to start pulling away monetary stimulus amid surging inflation and improvement in the job market.
- Covid cases because of the delta variant remain at January levelsas colder weather approaches in North America.
- September has the worst track record of any month, averaging a 0.4% decline, according to the Stock Trader’s Almanac. History shows the selling tends to pick up in the back half of the month.
- Investors are also concerned about brinkmanship in DC as the deadline to raise the debt ceiling approaches. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown.
Stocks linked to global growth were down the most in premarket trading Monday. Ford and Carrier Global lost more than 3%. General Motors and Boeing fell about 2% each. Nucor steel shed 2.8%
Wilson said he believes a “destructive outcome” is looking more likely that results in a pullback of 20% or more. On Friday, University of Michigan’s September consumer sentiment index came in at 71, just slightly above the August level that was the lowest in 9 years.
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