The movements mark the latest ebb for Wall Street, which has been mostly climbing in a series of stops and starts. Supporting the market have been rising expectations that a supercharged economic recovery is on the way thanks to COVID-19 vaccinations, immense spending by the U.S. government and continued low rates from the Federal Reserve. Weighing on stocks at the same time, though, are worries about a coming rise in inflation and possibly too-ebullient prices across the market.
Several key reports on the economy are scheduled for this week, which could help show whether stocks deserve the lofty prices they’ve reached. Among the headliners is Friday’s jobs report, where economists expect to see a big acceleration in hiring.
The market’s spotlight Monday was on financial companies after Japanese bank Nomura Holdings and Swiss bank Credit Suisse said they’re facing potentially significant losses because of their dealings with a major U.S. hedge fund, though the exact magnitude is still unclear.
Nomura estimated the claim against its client could be about $2 billion.
Credit Suisse said that it “and a number of other banks” are exiting trades they made with the hedge fund, which defaulted on a “margin call” last week. A margin call happens when a broker tells a client to put up cash after it borrowed money to make trades. Neither Credit Suisse nor Nomura named the client, but news reports identified it as New York-based Archegos Capital Management.
Shares of Credit Suisse and Nomura each fell at least 16% in their home countries, and U.S. banks also got caught in the downdraft as investors question whether the soured trades will stay isolated or have a more widespread effect through the system.
Morgan Stanley fell 3.1%, and financial stocks across the S&P 500 lost 0.9% for one of the sharpest losses among the 11 sectors that make up the index.
On the winning side was Boeing, which rose 3.2% after Southwest Airlines said it will order 100 737 MAX airplanes. Regulators in the United States and other countries have cleared the plane model to resume flying, after it was grounded worldwide in 2019 after two crashes that killed 346 people.
The yield on the 10-year Treasury rose to 1.67% from 1.66% late Friday.
In European stock markets, the German DAX returned 0.5%, and the French CAC 40 rose 0.5%. The FTSE 100 in London slipped 0.2%.
In Asia, Japan’s Nikkei 225 rose 0.7%, South Korea’s Kospi slipped 0.2% and Hong Kong’s Hang Seng was virtually flat. Stocks in Shanghai rose 0.5%.