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

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 tat least higher than it 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 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

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

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

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

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

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‘ 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.

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.

— Michelle Fox

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

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 Science.org 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

St. Louis Fed President James Bullard said Monday that the Fed should continue to raise its benchmark interest rate in the coming months and that the market may be underestimating the chance that the Fed has to get more aggressive.

“We’re going to have to continue pursue our interest rate increases into 2023, and there’s some risk that we’ve have to go even higher than [5%],” Bullard said at a Barron’s Live webinar.

Bullard made waves in financial markets earlier this month when he said the Fed’s hikes have had “only limited effects” on inflation so far and that the benchmark interest rate may need to rise to between 5% and 7%.

Bullard, who is a voting member of the FOMC, said that the Fed will need to hold off any rate cuts next year even if the inflation picture starts to show consistent improvement.

“I think we’ll probably have to stay there all through 2023 and into 2024, given the historical behavior of core PCE inflation or Dallas Fed trimmed mean inflation. They will come down, I think. That’s my baseline. But they probably won’t come down quite as fast as markets would like and probably the Fed would like,” Bullard said.

— Jesse Pound

The price of bitcoin took a dip on Monday after BlockFi officially announced it has filed for Chapter 11 bankruptcy in the wake of FTX’s bankruptcy.

Bitcoin briefly dropped to as low as about $16,000 but has rebounded already. It was last lower by just 1% to above $16,300, according to Coin Metrics. The action in the ether price showed a similar bounce.

BlockFi has been in bad shape since the spring, following the blowup of the Terra project that led to the implosion of Three Arrows Capital. At that time, the company accepted a bailout from FTX that would help it stave off bankruptcy. Of course, FTX is now managing its own bankruptcy.

— Tanaya Macheel

The three major indexes continued trading down as the market entered the second half of the day.

The Dow was down 1%, at times down more than 300 points.

The S&P 500 also dropped 1%, while the Nasdaq Composite shed 0.9%.

— Alex Harring

Anheuser-Busch InBev shares gained more than 4% after JPMorgan double-upgraded the stock to overweight, saying the beer giant should benefit from a recovery in light beer sales.

“After over a decade of minimal organic volume growth, ABI’s transition to a higher-quality top line growth story … is well underway,” wrote analyst Jared Dinges in his upgrade.

CNBC Pro subscribers can read the full story here.

— Samantha Subin

The Dow was down more than 300 points as the indexes continued to trade in the red.

The drop came as St. Louis Fed President James Bullard said the central bank is likely to keep hiking interest rates into 2023 as there was “a ways to go to get restrictive.” Investors are watching for if the Fed will continue its pattern of 75-basis point interest rate hikes in a bid to cool inflation as it can help them make predictions on how the market will perform going forward.

— Alex Harring

Equity markets and the Treasury yield curve are giving conflicting signals about the health of the economy, according to Jimmy Change, chief investment officer at Rockefeller Global Family Office.

“These are two very different stories,” he said on CNBC’s “Squawk on the Street.”

He said the equity markets are indicating that a pivot from the Fed on interest rates could indicate a soft landing, leading investors to believe “happy days are here again.”

But he said the Treasury yield curve between the 2-year and 10-year yield is as inverted as it has been since 1982. The treasury yields “scream” that a recession is “coming,” he said.

He said he “sides” with the bond market’s more pessimistic outlook due to indicators such as Fed surveys and what he called the declining housing market.

— Alex Harring

Retail ownership in SPACs has fallen dramatically as the frenzy in the market fizzled, according to SPAC Research.

Institutions who report their ownership held just over three-quarters of SPAC securities in March, leaving one-quarter of securities for retail owners and institutions not required to file, data from SPAC Research showed. However, by the end of the third quarter, institutional ownership climbed above 90%.

SPACs, special purpose acquisition companies, hit a record level of issuance last year as sponsors took advantage of low interest rates and massive investor appetite. However, the industry took a sharp turn for the worse this year as fears of rising rates dented the appeal for growth-oriented companies with little profits.

— Yun Li

Apple could deal with a major iPhone shortage of up to 10% this holiday season because of Covid protests in China, according to Wedbush’s Dan Ives.

“We estimate that Apple now has significant iPhone shortages that could take off roughly at least 5% of units in the quarter and potentially up to 10% depending on the next few weeks in China around Foxconn production and protests,” Ives wrote in a Monday note.

CNBC Pro subscribers can read the full story here.

— Sarah Min

Eight stocks surged to new 52-week highs Monday, in the final trading week of November, even as the broader market slipped. Here’s what companies notched records:

—Carmen Reinicke, Chris Hayes

Mohamed El-Erian, Allianz and Gramercy advisor, said the way China has been managing Covid is “totally baffling” but can be fixed with Western vaccines, although it would still take months to achieve herd immunity.

“We had the issue of lives versus livelihood, and we flip flopped because vaccines came along and allowed for certain degree of her immunity,” he told CNBC’s “Squawk Box” Monday. “China has been trying the Covid Zero policy, never got out of the live versus livelihood dilemma, has flip flopped and now the population’s patience has been tested.”

The protests will likely lead to supply “uncertainty” for companies that operate there. For everyone else, it could be an obstacle to lower inflation.

“We may have an issue where inflation gets stuck at around 4%,” he said. “Supply chain issues, the change of globalization [and] wages mean inflation will not get back to 2% quickly for us. For the companies involved, it means it takes longer than they would like to rewire the supply chains.”

— Tanaya Macheel

Shares of key retail stocks rose Monday after Black Friday broke an online shopping record. Consumers spent a new high of $9.12 billion online during the retail holiday according to Adobe.

Amazon stock gained 1.7% on Monday following the shopping record. Shares of Target also rose 1.8%. Walmart also ticked slightly higher, up about 0.31% Monday morning.

—Carmen Reinicke

The recent rally for the market is starting show “some signs of exhaustion,” Katie Stockton of Fairlead Strategies said on “Squawk Box.”

Stockton said that the S&P 500 is nearing its 200-day moving average and is unlikely to break above that level for long. She pointed to the Cboe Volatility Index, which jumped above 22 on Monday morning after falling to just above 20 late last week.

“We have a little bit of a gap up there. And that gap up follows some signs of short-term downside exhaustion for the Vix last week. That has us paying attention, looking for perhaps an increase in volatility,” Stockton said.

— Jesse Pound

Apple shares fell 1.4% during early trading following a report that the company could suffer an iPhone production shortfall as a result of unrest at its biggest supplier.

Protests and worker tumult at Foxconn’s factory in China could result in the company producing 6 million fewer iPhone Pro models, Bloomberg reported Monday, citing a person familiar with the matter.

A wave of protests has rippled through China in recent days as individuals grow frustrated over the country’s strict and prolonged zero Covid policy.

The source said Foxconn and Apple should make up for the supply shortfall in 2023.

— Samantha Subin

The three major indexes opened down as protests in China reversed course for the market from the gains seen during the shortened Thanksgiving trading week.

The Dow was down 0.4%. The S&P 500 lost 0.5%, while the Nasdaq Composite shed 0.2%.

— Alex Harring

JPMorgan downgraded shares of First Solar to neutral from overweight, saying the stock is due for a breather after rallying on the back of the Inflation Reduction Act’s passage in August.

“We expect bookings to remain strong and therefore believe existing holders should maintain positions, though with an expected uptick in manufacturing capacity announcements from competitors in FY23, we expect the pace of FSLR’s multiple re-rating to slow,” analyst Mark Strouse wrote.

CNBC Pro subscribers can read more on the downgrade, which sent shares down more than 3% before the bell.

— Samantha Subin

West Texas Intermediate crude oil hit a low of $73.60 per barrel Monday, marking the cheapest price since 2022 began.

The last time the crude traded lower at any point in trading was Dec. 27, 2021, when the price came down to $72.57. The price per barrel has lost 14.6% since November began, putting it on track for its worst month since November 2021, when it dropped 20.8%.

Brent crude traded at a low of $80.61 per barrel, its lowest since it hit $80.50 on Jan. 10. Brent has also dropped 14.6% this month and is similarly poised to post its worst monthly performance since it lost 16.4% in November 2021.

— Alex Harring, Gina Francolla

Futures connected to the Dow traded down more than 200 points, or 0.6%, as the pre-market entered its final hour.

Meanwhile, S&P 500 and Nasdaq 100 futures each lost about 0.8%.

— Alex Harring

Investors are watching Apple amid concerns over the impact of protests of Covid restrictions in China on business. But the tech giant does not need to be sold as it moves away from a high concentration of production in China, said Gene Munster, founder and managing partner at Loup Ventures.

“I don’t think you should sell the stock,” he said on “Squawk Box.”

Munster said investors should watch if companies remain committed to doing the majority of its production in China when deciding when to hold. But he said Apple is making “some measurable moves to diversify away” from China, pointing to the sliding share of revenue related to production in China over time as seen when comparing supplier lists over recent years.

“That speaks to Apple’s commitment to starting to diversify away from the region,” Munster said of the revenue data.

Apple has shed 1.9% in pre-market trading following a Bloomberg report showing that the company could see a production shortfall of close to 6 million iPhone Pro models due to protest-related unrest at a contract manufacturing factory in China. Apple and Foxconn, which runs the factory, don’t expect to make up that shortfall in 2023, a person familiar with assembly operations told Bloomberg.

The stock has lost 16.6% so far this year.

— Alex Harring

These are some of the stocks making the biggest moves in pre-market trading:

• Apple – Apple slid 1.7% in premarket trading.on reports of a production shortfall of close to 6 million iPhone Pro models due to Covid-related unrest at contract manufacturer Foxconn’s China factory. A person familiar with assembly operations told Bloomberg that Apple and Foxconn do expect to be able to make up that shortfall in 2023.
• Taboola.com – The software company’s stock soared 65.2% in premarket action after it announced a 30-year agreement with Yahoo, under which Taboola will power native advertising on all Yahoo platforms.
• Exxon Mobil, Chevron – Exxon and Chevron lost 1.8% and 1.7%, respectively, as energy stocks fell in the premarket with WTI Crude touching its lowest level in 11 months.
• Anheuser-Busch InBev – Anheuser-Busch InBev jumped 4.2% in the premarket after a double upgrade from J.P. Morgan Securities to “overweight” from “underweight.”

See the full list here.

— Alex Harring, Peter Schacknow

Futures stayed in the red as the pre-market entered its final two hours.

Futures connected to the Dow shed 189 points, or 0.5%.

S&P 500 and Nasdaq 100 futures each lost 0.7%.

The performance comes as as social unrest from China’s Covid restrictions hit stocks. It marked a turn from a winning Thanksgiving trading week within U.S. equity markets.

— Alex Harring

Apple shares shed nearly 2% in the premarket following a Bloomberg report that unrest at the company’s biggest supplier could result in 6 million fewer iPhone Pro units for the year.

Protests have erupted in China in recent days over new lockdowns and Covid-19 restrictions — including at Foxconn’s Zhengzhou manufacturing facility, which accounts for the majority of iPhone shipments worldwide.

The Bloomberg report cited people familiar with the matter.

— Samantha Subin

Tech stocks dipped to start the week along with the broader market. Shares of Micron Technology, Nvidia and AMD all fell more than 1%. Apple shares also slid 1.8%.

— Fred Imbert

Energy stocks were under pressure in the premarket Monday as oil prices took a hit, with investors pondering the potential effect of civil unrest in China on global growth.

The Energy Select Sector SPDR Fund (XLE) fell more than 2% before the bell. Shares of Chevron and Exxon Mobil dipped 1.9% and 2.1%, respectively. Oil, meanwhile, slid 3.1% to $73.90 per barrel, hovering near its lowest level in about a year.

— Fred Imbert

European markets retreated on Monday as investors monitored unrest in China as protests against strict Covid measures and lockdowns erupted over the weekend.

The pan-European Stoxx 600 was down 0.6% in early trade, with oil and gas stocks shedding 2% to lead losses as almost all sectors and major bourses slid into the red.

– Elliot Smith

China is most likely to reopen around April next year after the National People’s Congress takes place, but there’s a chance that authorities reopen earlier due to difficulties in keeping Covid cases under control, according to Goldman Sachs.

Chief China Economist Hui Shan said there’s a 60% chance of the former scenario taking place.

“There is also a 30% probability of earlier reopening precisely because of the difficulty in keeping Covid under control, and the lack of medical preparation suggests it could be quite a messy process,” she said.

“Medical preparation is not ready yet, whereas the virus has evolved in such a way [that] it’s getting very costly to continue to implement that dynamic zero-Covid policy,” she said.

She said that policymakers need to weigh out the costs and benefits of the stringent Covid restrictions as protests take place across the country.

“This is not something they had experienced before [or] had a lot of experience in dealing with in prior cycles,” she said.

— Su-Lin Tan

Both U.S. crude futures and Brent crude futures shed more than 2% each in Asia’s morning trade as fears on demand from China faltering came into focus.

West Texas Intermediate futures fell as low as $73.86 per barrel, the lowest levels since December 2021, while Brent crude futures slipped to $81.16 per barrel at the session’s lows so far.

WTI was last down 2.6% at $74.31 per barrel, while Brent crude last traded 2.4% lower at $81.65 per barrel.

— Abigail Ng

The offshore Chinese yuan sharply weakened against the U.S. dollar amid negative sentiment over unrest in China over Covid restrictions.

The currency weakened around 0.8% against the U.S. dollar to 7.2529 in Asia’s morning trade.

The dollar index rose 0.32% to 106.29, with investors likely seeing the greenback as a safe haven asset as concern over China grows.

— Jihye Lee

Investors are watching retail stocks this holiday season, following a record-breaking black Friday.

While there are worries of an economic slowdown and a weakening U.S. consumer, analysts are bullish on a few key retail stocks that should grow in the coming months.

CNBC Pro used FactSet data to find a list of the top retail stocks, including names such as Amazon and Bath & Body Works.

Pro subscribers can read more here.

—Carmen Reinicke, Tanaya Macheel

Here are the companies that are scheduled to report quarterly earnings this week.

Monday – Azek

Tuesday – Hewlett Packard Enterprise, NetApp, CrowdStrike, Intuit

Wednesday – Salesforce, Box, Petco, Pure Storage, Splunk, Five Below, Hormel, Snowflake, Octa, Royal Bank of Canada, PVH, Victoria’s Secret, Synopsis, La-Z-Boy

Thursday – Kroger, Zscaler, ChargePoint, Dollar General, Ulta Beauty, Ambarella, Lands’ End, Ambarella, Designer Brands, American Outdoor Brands, Asana, Marvell Tech, Big Lots, Toronto Dominion, Bank of Montreal, Canadian Imperial Bank, Zumiez

Friday – Cracker Barrel

—Carmen Reinicke

U.S. stock futures slipped Sunday evening after Wall Street notched a winning week.

Futures tied to the Dow Jones Industrial Average lost 72 points, or 0.21%. S&P 500 futures were 0.32% lower and Nasdaq 100 futures shed 0.48%.

—Carmen Reinicke