Stocks headed back toward session lows in the last hour of trading Monday as investors assessed the latest signs of economic malaise in the US and China. 

The S&P 500 fell, dragged lower by a slide in megacaps including Tesla Inc., Amazon.com Inc. and Apple Inc. The tech-heavy Nasdaq 100 dropped more than 1 per cent. Equity markets gave up earlier gains in a seesaw session amid data showing China’s industrial output and consumer spending hit the worst levels since the pandemic began, hurt by COVID lockdowns. New York state manufacturing activity unexpectedly contracted in May, stoking concerns of slowing economic activity that may complicate the Federal Reserve’s policy path. 

Adding to those growth concerns, New York City is preparing to hit a high COVID-transmission level in the coming days that would have it reconsidering mask requirements in public places. 

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.”  That said, while the US market is pricing in 40 per cent odds of a recession, history shows the S&P 500 tended to rally in the absence of the worst case, according to a study by UBS Group AG. 

Market commentary

• “You’ve got investors pulling back from the market in the expectation that we’re going to have a recession,” David Donabedian, chief investment officer of CIBC Private Wealth Management, said by phone. “It’s hard to, frankly, make a strong argument against that, the idea that we’ll have a recession. We know that that’s what Federal Reserve tightening produces most of the time, it’s a recession. And so you have to have a good answer to the question of why would this time be different, and it’s not that easy to come up with that answer, frankly.”
• “With inflation showing little sign of letting up, the Fed is under pressure to accelerate the pace of tightening,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a note. “This is increasingly problematic as the complicating factors from the Russia-Ukraine conflict and the China COVID response are also intensifying. All told, this suggests global growth may be decelerating more quickly than forecast.”

In corporate news, Twitter Inc. shares fell Monday, erasing all the gains the stock made since Elon Musk disclosed his stake in the social media platform. JetBlue Airways Corp. made a hostile US$3.3 billion cash bid for Spirit Airlines Inc., appealing directly to shareholders to prevail over a rival offer for the discount carrier. Verizon Communications Inc. plans to raise prices on its wireless bills for the first time in two years. McDonald’s Corp. said it will pull out of Russia after more than 30 years of operation in the country and will take a write-off of US$1.2 billion to US$1.4 billion for the move.

Cryptocurrencies dipped as the mood in stocks weakened. That took Bitcoin back to around the US$30,000 level.

What to watch this week:

• Fed Chair Jerome Powell among slate of Fed speakers Tuesday
• Reserve Bank of Australia releases minutes of its May policy meeting Tuesday
• G-7 finance ministers and central bankers meeting Wednesday
• Eurozone, UK CPI Wednesday
• Philadelphia Fed President Patrick Harker speaks Wednesday
• China loan prime rates Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.5 per cent as of 3:47 p.m. New York time
• The Nasdaq 100 fell 1.3 per cent
• The Dow Jones Industrial Average was little changed
• The MSCI World index fell 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.3 per cent
• The euro rose 0.2 per cent to US$1.0432
• The British pound rose 0.4 per cent to US$1.2317
• The Japanese yen rose 0.1 per cent to 129.04 per dollar

Bonds

• The yield on 10-year Treasuries declined three basis points to 2.88 per cent
• Germany’s 10-year yield declined one basis point to 0.94 per cent
• Britain’s 10-year yield declined one basis point to 1.73 per cent

Commodities

• West Texas Intermediate crude rose 2.9 per cent to US$113.71 a barrel
• Gold futures rose 0.9 per cent to US$1,823.60 an ounce