US: Stocks drop amid growth concerns

STOCKS declined in early trading as investors assessed the latest signs of economic malaise from the US and China, amid speculation about the Federal Reserve’s rate-hike trajectory. Treasuries gained, while the dollar held steady.

The S&P 500 traded off session lows as energy stocks bounced with oil in New York. The tech-heavy Nasdaq 100 underperformed major benchmarks. Data on Monday (May 16) showed New York state manufacturing activity unexpectedly contracted in May for the second time in three months, stoking concerns of slowing economic activity that may complicate the Fed’s policy path. 

The New York Fed’s data are the first of several regional Fed manufacturing numbers set for release over the coming weeks. Similarly, disappointing figures may temper bets on a steep rate-hike cycle as the Fed battles inflation. Meanwhile, China’s industrial output and consumer spending hit the worst levels since the pandemic began, hurt by Covid lockdowns.

The risk of an economic downturn amid price pressures and rising borrowing costs remains the major worry for markets. Goldman Sachs Group Inc senior chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk”. Traders remain wary of calling a bottom for equities despite a 17 per cent drop in global shares this year, with Morgan Stanley warning that any bounce in US stocks would be a bear-market rally and more declines lie ahead.

BLOOMBERG