Midday Report: US Stocks Sink With Yields Amid Debt Crunch for China's Evergrande

Last Updated: Monday, September 20, 2021 1:10 PM | MT Newswires

US stocks plunged with government bond yields Monday amid concerns about the financial and economic contagion from the feared collapse of China's Evergrande, reportedly the world's most heavily indebted real estate developer, and ahead of a key Federal Reserve policy meeting.

The Dow Jones Industrial Average sank 2% to 33,887.97, with S&P 500 down 2.1% and Nasdaq lower by 2.6%. All sectors were in the red after midday on Monday.

The Chicago Board of Exchange Volatility Index (VIX), measuring the volatility expectations embedded in near-term index options prices, soared to its highest level since mid-May.

The 10-year US Treasury yield fell 6 points to almost 1.31%. The yen rose 0.5% against the dollar.

The Hang Seng equity index in Hong Kong sold off 3.3% Monday and Australia's S&P/ASX 200 was down 2.1%. With $300 billion in debt, Evergrande is facing bond payments due this week, and though the company is expected to ultimately fold the question is how China will deal with the losses of its creditors, according to Bank of Montreal. Markets in China, Japan and South Korea were closed Monday for national holidays.

"The source of the angst is ongoing worries about the broader implications of worsening developments at the beleaguered China Evergrande Group -- its stock has plunged a further 10% on Monday -- and reports that more companies in the property sector might be prospective targets for Beijing's regulators," a research note from Daiwa Capital Markets said.

The Federal Reserve will hold a monetary policy meeting Tuesday and Wednesday. The market is awaiting word on when the central bank will begin tapering its $120 billion in monthly asset purchases.

West Texas Intermediate crude oil fell $1.49 to $70.48 per barrel, while gold gained $9 to $1,760.40 per troy ounce.

In corporate news, Nucor (NUE) said it plans to build a new sheet mill with a "significantly lower carbon footprint" than nearby competitors in the US Midwest and Northeast. Shares slumped 8.7%.

American Airlines (AAL) said it is investing $100 million in a "groundbreaking collaborative effort" to accelerate the clean energy technologies necessary for achieving a net zero economy by 2050. Shares were up 1.3%.

Chinese companies Pinduoduo (PDD), Baidu (BIDU), and JD.com (JD) were among the biggest Nasdaq laggards, each down by at least 5.1% intraday.

In the metals markets, silver was down 0.5% to $22.22 an ounce while copper slumped 3.3% to $4.10 per pound.

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