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Market Snapshot: U.S. stock futures and oil tumble as China’s COVID spread adds to Fed rate-hike worries

U.S. stock futures fell alongside oil prices on Monday, as investors juggled concerns over the pace of Federal Reserve rate hikes with news of more lockdowns in China amid rising COVID cases.

How are stock-index futures trading?
  • S&P 500 futures ES00, -0.86% dropped 31 points, or 0.7%, to 4,236
  • Dow Jones Industrial Average YM00, -0.71% fell 195 points, or 0.6%, to 33,529
  • Nasdaq-100 futures NQ00, -0.93% dropped 111 points, or 0.8%, to 13,240

On Friday, the Dow industrials DJIA, -2.82% shed about 981 points, or 2.8%, to 33,811.40, marking its worst daily percentage drop since Oct. 28, 2020, according to Dow Jones Market data. The index declined 1,019 points at its session low. The S&P 500 index  SPX, -2.77% slid 2.8% to end at 4,271.78 and the Nasdaq Composite Index  COMP, -2.55% tumbled 2.6% at 12,839.29.

For the week, the Dow was down 1.9%, the S&P 500 fell 2.8% and the Nasdaq dropped 3.8%, according to FactSet.

What’s driving the markets?

Following the end week meltdown, stock futures began tumbling on Sunday evening, as news of fresh COVID lockdowns in China added to worries for already jittery investors.

Beijing began testing millions of residents and shutting down business districts and some residential areas on Monday amid a spike in infections. Millions in Shanghai remain under restrictions as that financial hub has struggled with rising infections.

“More lockdowns reduce demand for commodities in the short-term which is an easing factor for commodity inflation, but lockdowns also create bottlenecks in the world’s factory which causes more delays and potentially inflation in consumer markets in the U.S. and Europe,” strategists at Saxo Bank told clients in a note.

China’s CSI 300 000300, -4.94% slumped 4.9% to 3,814, its weakest close since April 2020, while a host of commodities were also hit hard. Steel and iron ore futures tumbled in Asia and U.S. CL00, -4.37% and Brent crude prices BRN00, -4.37% were down over 4% each.

The People’s Bank of China said later on Monday that it was cutting its foreign exchange deposit reserve ratio by 1 percentage point, to 8%.

Investors piled into bonds and the dollar, but not gold.

Markets are facing a busy week on the economic front, as the Fed is now in a blackout period ahead of the May 3-4 Federal Open Market Committee meeting. The March core personal-consumption expenditures price index, the central bank’s favored inflation indicator, is due Friday. The data calendar is empty for Monday.

Wall Street is also bracing for a busy earnings week, with quarterly reports due from Apple AAPL, -2.78%,  Facebook parent Meta Platforms Inc. FB, -2.11%,  Google parent Alphabet Inc. GOOGL, -4.15%,  Amazon.com Inc.  AMZN, -2.66% and Microsoft Corp.  MSFT, -2.41%,  among others.

“As technology companies are the biggest constituents in the main indices, it’s crucial how these companies perform on earnings this week, but also that they can demonstrate less impact from inflation,” added Saxo strategists.

European stocks also tumbled Monday, getting no lift from news French President Emmanuel Macron was elected for a second term, defeating far-right challenger Marine Le Pen.

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What companies are in focus?
How are other assets trading?

Mike Murphy contributed to this article

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