New York (CNN Business)US stocks are rebounding Tuesday, after concerns about potential contagion from Chinese real estate giant Evergrande’s debt crisis led to the worst session for the market in months.
After weeks without a clear driver for markets, Evergrande’s trouble came at just the right time to trigger a massive selloff. Analysts have long said a correction of prices was necessary given how long the recovery rally has been going on.But after Monday’s steep drop, investors are already taking a breather and Wall Street opened with green arrows across the board.
The Dow (INDU) rose 0.4%, or 144 points, at the opening bell. The S&P 500 (SPX) opened 0.4% higher and the Nasdaq Composite (COMP) climbed 0.5%.
Elsewhere, the 10-year US Treasury bond yield is flat. Yields fell and prices rose Monday as investors rushed into the safety of Treasuries.Read MoreBitcoin, which sold off Monday, still traded lower, down about 1%.
What’s next for Evergrande?
Evergrande is stumbling under its $300 billion debt burden ahead of a $100 million interest payment on two of its bonds later this week. Should the conglomerate actually default, the aftershocks would likely ripple across financial markets, bringing up memories of the financial crisis on the thirteenth anniversary of the collapse of Lehman Brothers.But unlike Lehman Brothers, an Evergrande default — should it even come to that — might be much more contained and only affect selected financial institutions.Another big question is whether the Chinese government might be willing to bail the company out. But so far Beijing has remained quiet.
What’s next for Wall Street?
Even without Evergrande Wall Street had a lot going on.For one, there’s the Delta variant of the coronavirus boosting infections across the nation, weighing on consumer sentiment and hiring in industries reliant on face-to-face contact.The Back-to-Normal Index from CNN Business and Moody’s Analytics dropped to its lowest level since early June on Friday, reflecting Delta’s impact on the recovery.Then there’s America’s own debt problem as Washington is trying to raise the debt ceiling to allow for the next budget.
“While concerns over contagion from China’s Evergrande bond debacle helped spark the selloff, fiscal policy worries were more the culprit,” wrote economists at Action Economics in a note to clients, adding that the US “government is on course for a shutdown if there are no new funding measures enacted by the end of the month.”And if that weren’t enough, the Federal Reserve’s two-day policy meeting gets underway Tuesday ahead of the central bank’s official update on Wednesday.
Source: edition.cnn.com