Stocks close lower, Dow drops nearly 500 points as supply chain concerns mount amid protests in China

Pro Picks: Watch all of Monday's big stock calls on CNBC
Pro Picks: Watch all of Monday's big stock calls on CNBC

Stocks closed lower Monday as social unrest from China's prolonged Covid restrictions weighed on markets.

The Dow Jones Industrial Average lost 497.57 points, or 1.45%, to end at 33,849.46. The S&P 500 dropped 1.54% to end at 3,963.94. The Nasdaq Composite ended down 1.58% to close at 11,049.50.

Monday's selloff was driven by demonstrations that broke out in mainland China over the weekend as people vented their frustrations with Beijing's zero-Covid policy. Local governments tightened Covid controls as cases surged, even though earlier this month Beijing adjusted some policies that suggested the world's second-biggest economy was on its way to reopening.

The developments reverberated across global markets in Monday trading, with West Texas Intermediate crude futures briefly dipping to their lowest price since last December.

Shares of companies with big production facilities in China were under pressure. Apple dropped 2.6% after Bloomberg reported that unrest at a factory in China could mean 6 million fewer iPhone Pro units for the year.

"When you look at Apple not being able to fulfill the orders for their iPhone because the factories in China are shut down, I think that's a perfect example of how something in one country can affect somewhere else," said Victoria Fernandez, chief market strategist at Crossmark Global Investments. "It just has a ripple effect through the global economy when you have something as large as the Chinese economy shutting down."

Market observers expect more volatility ahead as investors digest a raft of economic data coming later this week that will offer further information on the state of the U.S. economy. Key releases include Thursday's personal consumption expenditures report – a key inflation measure for the Federal Reserve – and November payrolls report, scheduled for Friday.

Investors will also watch speeches from Fed Chair Jerome Powell and other central bank officials for hints into what future interest rate hikes could look like as the central bank continues trying to cool inflation.

Lea la cobertura del mercado de hoy en español aquí.

Stocks end Monday's session lower

After a winning Thanksgiving week, the three major indexes ended Monday down as investors sold off amid mounting concerns over supply chain disruptions amid Covid-related protests in China.

The Dow Jones Industrial Average lost 1.45%, or 497.57 points, and closed at 33,849.46. The S&P 500 also shed 1.54% to end at 3,963.94. The Nasdaq Composite slipped 1.58% and ended at 11,049.50.

— Alex Harring

Powell will likely disagree with investors on when interest rate cuts will begin, market strategist predicts

Investors will be watching for Fed Chair Jerome Powell's speech on Wednesday, said Victoria Fernandez, chief market strategist of Crossmark Global Investments. But she said they might be surprised on one point.

"People are waiting, kind of with bated breath, to say, 'Oh, my goodness, what's the message he's going to give,'" she said.

Powell is expected to speak Wednesday afternoon in Washington, D.C., at the Brookings Institute Hutchins Center on Fiscal and Monetary Policy about the outlook for the economy and changing labor market.

She predicted Powell will likely "agree" with the market that the terminal rate will be around 5% or at least higher than in September. She also said Powell will likely agree that a 50-basis point hike at the next meeting would be appropriate.

But she said Powell and investors will not totally align and that he will likely push back on expectations that interest rates will start getting cut down in October 2023.

"I think he's really going to push back and say, 'Look, the labor market is strong. Demand is still decently strong. You know, let's see what the GDP numbers are this week,'" she said.

"Obviously, that can change if we have a deep recession next year, but we're not expecting that," she said, noting that a shallow recession is more widely expected. "And I think Powell is going to stay higher for longer."

— Alex Harring

All 11 S&P 500 sectors trade down

All of the S&P 500's 11 sectors traded down late in the trading day Monday.

The worst performer was real estate, which had dropped 2.8%. Though still in the red, consumer staples performed the best, posting a loss of 0.4%.

— Alex Harring

Goldman says the bottom is not yet in

Investors should continue to position themselves defensively going into 2023 with further headwinds from rising real yields likely and lingering growth uncertainty, according to a team of strategists at Goldman Sachs.

Goldman's strategists said conditions for an equity bottom have not yet been reached. The Wall Street firm set its year-end 2023 target at 4,000 on the S&P 500, just below its Friday's close of 4,026.12.

"We are looking for lower valuations, a trough in negative growth momentum and a peak in interest rates before a new bull market starts," Goldman said. "We expect markets to transition to a 'Hope' phase at some point in 2023 but from a lower level."

— Yun Li

Dow breaks 500 points down as selloff continues

The Dow's downward descent continued in the final hour of trading as it moved more than 500 points down.

The 30-stock index lost around 526 points, or 1.5%.

Both the Nasdaq Composite and S&P 500 have shed 1.6%.

— Alex Harring

Signature Bank loses 11% following BlockFi bankruptcy filing

Shares of crypto friendly bank Silvergate slid 11.5% on Monday after BlockFi formally filed for Chapter 11 bankruptcy as part of the continued fallout of FTX. Silvergate was BlockFi's banking partner.

Silvergate, along with Signature Bank in New York, have maintained an open stance toward crypto companies, serving them when many traditional banks have steered clear of such risky business. Signature's shares fell 4% Monday.

— Tanaya Macheel

Indexes stay negative entering final trading hour

The three indexes remained trading down as investors entered the final hour of trading.

The Dow was down 1.4%. Meanwhile, the S&P 500 and Nasdaq Composite both lost 1.5%.

— Alex Harring

Momentum points to further downside for bitcoin, says BTIG's Krinsky

Bitcoin has been hovering at the $16,000 level since the sudden demise of FTX at the beginning of this month.

While the price has held up relatively well given the shock and widespread impact of the FTX collapse, it may not be finished falling, according to BTIG's Jonathan Krinsky.

Bitcoin "has now spent about two weeks in a large trading range between $15,500 and $17,000," he said in a note Monday. "Momentum still looks to be favoring a downside resolution, and [a] third or fourth test of $16,000 is much less likely to hold than the first two, in our view."

— Tanaya Macheel

DraftKings' shares slump on JPMorgan downgrade

DraftKings' stock shed 5% after JPMorgan downgraded shares of the sports betting company to underweight from neutral.

"For DKNG, we see a longer runway and more risk to achieving OSB profitability than peers; with the stock's bounce since earnings, we see 20% downside to our unchanged year-end 2023 price target," wrote analyst Joseph Greff.

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— Samantha Subin

Oil comes off lows

Oil turned positive on Monday, with West Texas Intermediate crude rising $1.14, or 1.5%, to $77.42 per barrel. Earlier in the day, it hit a low of $73.60, which is the cheapest price since the year began.

Brent crude, meanwhile, regained some of its earlier losses, down 7 cents, or 0.1%, to $83.56. It traded as low as $80.61 per barrel on Monday, its lowest level since Jan. 10.

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— Michelle Fox

Dow breaks 400 points down

The Dow traded more than 400 points down as protests in China continued to weigh on markets.

The 30-stock index has traded between 300 and 400 points in the red for much of the trading day. The S&P 500 and Nasdaq Composite were similarly trading down.

— Alex Harring

Wynn Resorts, Anheuser-Busch InBev and Biogen among stocks moving midday

These are some of the stocks making the biggest moves midday.

  • Wynn Resorts, Melco Resorts — Shares of Wynn Resorts and Melco Resorts gained 4.62% and 9.71% respectively, after the Chinese government granted them provisional licenses to continue operating casinos in Macau.
  • Anheuser-Busch InBev — The beer giant's stock rose more than 3% after being double upgraded from JPMorgan, which said Anheuser-Busch InBev will benefit from a resurgence in demand for domestic light beer and the decline in hard seltzer demand.
  • Biogen — Biogen sank 3.47% after a report that a woman participating in an experimental Alzheimer's treatment trial, sponsored by Biogen and a Japanese pharma company, recently died from a brain hemorrhage.

Read the full list of stocks making the biggest moves midday here.

— Michelle Fox

Fed should keep hiking into next year, Bullard says

James Bullard at Jackson Hole, Wyoming.
David A. Grogan | CNBC