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S&P 500 Falls as China Credit Contagion Fears Deepen September Slide

Stock MarketsSep 20, 2021 04:48PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 suffered its biggest slump since May, amid fears a debt crisis at China Evergrande Group could spark credit crunch in China's crucial real estate sector, leading to a potential economic crisis in the world's second largest economy.    

The S&P 500 fell 1.7%, and is down about 5% from its recent highs. The Nasdaq fell 2.1%, and Dow Jones Industrial Average slipped 1.8%, or 614 points, though had fallen more than 900 points at the lows of the day. 

China Evergrande Group, the second largest property company in China, has more than $300 billion in liabilities, and reports suggest it won’t hit an interest payment deadline on its offshore bonds due Thursday.

Failure of the Chinese property giant to make good on its debt payments could force it into bankruptcy, sparking a wider liquidity crisis in real estate sector -- a key component of the nation's economy - that added to investor angst over growth, the impact of the Delta variant of the coronavirus, and ongoing budget negotiations on Capitol Hill. 

'The Evergrande crisis comes at a time when the Chinese consumer economy has slowed due to COVID-19 concerns ... this could combine to create growth challenges in China and many commodities," DA Davidson said in a note. "This creates more risk for U.S. equity investors, who are already navigating concerns about peak growth of U.S. GDP and corporate earnings, consumer hesitancy caused by the COVID Delta variant, inflation, and Congressional budget negotiations," it added.

Fears of the potential economic crisis in China, the largest energy consumer, sent oil prices tumbling, and triggered a more than 4% drop in energy.

Devon Energy (NYSE:DVN), APA (NASDAQ:APA), Hess (NYSE:HES) led the declines to the downside in energy.

Financials, meanwhile, were dragged lower by falling bank stocks amid a slump in U.S. Treasury yields, with Citigroup (NYSE:C), Fifth Third Bancorp (NASDAQ:FITB), and SVB Financial (NASDAQ:SIVB) nursing heavy losses.

Tech also participated in the broad-based selloff as investors appeared to take a breather from the ‘buy the dip’ mentally ahead of the Federal Reserve’s two-day meeting starting Tuesday.

Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), ended mostly more than 1% lower. 

Travel stocks, however, sidestepped the market malaise as airlines were boosted by easing travel restrictions.

The U.S. is set to ease travel restrictions for international visitors who are vaccinated against Covid-19 in November, the White House said Monday.

American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL), and Delta Air Lines (NYSE:DAL) outperformed relative to broader-market meltdown.

S&P 500 Falls as China Credit Contagion Fears Deepen September Slide
 

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Comments (17)
Dave Jones
Dave Jones Sep 20, 2021 9:34PM ET
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helter skelter
Pratt Man
Pratt Man Sep 20, 2021 8:01PM ET
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I bought everything I could today. In two years, nobody will remember ever grande. and the last time the fed tapered, the market rallied 120%.
Patrick Mueller
Patrick Mueller Sep 20, 2021 8:01PM ET
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Enron Called.
Nordin Mohamad
Nordin Mohamad Sep 20, 2021 8:01PM ET
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biden wish is to slow down ccp is answered ....it could start internal unrest in china and always the case red army will kill their own brotheraand sisters as well as their own fathers and mothers that involved in the unrest
Jason McHenry
Jason McHenry Sep 20, 2021 7:40PM ET
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Evergrande must have got the jab.
michael engel
michael engel Sep 20, 2021 6:48PM ET
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Wave 3 is over. Wave 4 is next. Tomorrow might be another volatile day.
Meru Pet
Meru Pet Sep 20, 2021 6:48PM ET
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check the future
ben sc
ben sc Sep 20, 2021 6:32PM ET
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Contagion!!! Why are so many contagious things coming from China? Past time for the great decoupling to take place. Hate TrumpF but it's wise for the world to diversify supply lines as well as reevaluate investment standards. It actually helps Fed to have this happen as it would drive rates lower.
Meru Pet
Meru Pet Sep 20, 2021 6:32PM ET
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you know... commerce brings peace ✌️
michael engel
michael engel Sep 20, 2021 6:14PM ET
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SPX retraced 76.7% of the wave from July 19 low to Sept 2 top. SPX was weaken, but  from May 19 low, SPX retraced ONLY 50%.
WILLIAM HAGERTY
WILLIAM HAGERTY Sep 20, 2021 6:12PM ET
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Dude in the picture should be payed. I see him once a week.
Roger Miller
Roger Miller Sep 20, 2021 5:54PM ET
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The issue with Evergrande is just a convenient talking point for the media, but everyone knows the market wants more of the Fed's printed money.  If Evergrande were to implode the market would more then likely boom as people will expect massive Fed intervention.  We've seen this with poor economic and job number announcements.
Sep 20, 2021 5:38PM ET
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sold US30 @ 34554.49 sell continues
NDUBUISI Nweze
NDUBUISI Nweze Sep 20, 2021 5:31PM ET
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how I wish someone could give me dollars let me double it up..
New Jazenevd
New Jazenevd Sep 20, 2021 5:31PM ET
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Talk to Fed, it used to help.
Berry Gold
Berry Gold Sep 20, 2021 5:31PM ET
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wow
Edison Kashari
Edison Kashari Sep 20, 2021 5:29PM ET
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For sure it's not these reason. China is preparing for something called " take the rest".
New Jazenevd
New Jazenevd Sep 20, 2021 5:15PM ET
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Perhaps, US tax increases affect market substantially more that debt issues with a little-known Chinese company. Of course, media readily promotes Chinese story. In any case, money printing will support the market through this pullback.
Millennial Metals
Millennial Metals Sep 20, 2021 5:07PM ET
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Total market collapse soon
Kerry Hilson
Kerry Hilson Sep 20, 2021 5:02PM ET
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I need some amount
Ahmad Rifai
Ahmad Rifai Sep 20, 2021 5:02PM ET
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what is the next gold prediction
New Jazenevd
New Jazenevd Sep 20, 2021 5:02PM ET
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Who cares about gold? It is a speckle on market body, that can be driven easily in any direction.
Maks Mars
Maks Mars Sep 20, 2021 5:02PM ET
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no need for gold in a modern world lol 800$ in few months
Stan Smith
Stan Smith Sep 20, 2021 5:01PM ET
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Where's the 'Bears Roar' headline!
mad god
mad god Sep 20, 2021 4:58PM ET
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i gotta tell ya man... china will do just fine... they have a lot of $$ and need to find someway to burn it. this is perfect way to burn some cash to allow other to catch up. even entire real estate sector disappears in china  the money will flow to other sectors and make china #1 in the solar system for sure!
Katie Belle
Katie Belle Sep 20, 2021 4:58PM ET
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china has a lot of debt. aka borrowed money
Millennial Metals
Millennial Metals Sep 20, 2021 4:58PM ET
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Katie Belle you mean the USA
mad god
mad god Sep 20, 2021 4:58PM ET
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Millennial Metals  China has no debts so it is good to let more real estate developer bankrupted, too much money can weaken the country therefore more companies go bankruptcy will make China stronger. everyone knows about this simple logic. good!
 
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