Dow futures drop more than 600 points amid September sell-off

US stock futures tumbled Monday morning as the Dow Jones Industrial Average dropped more than 630 points after booking three straight weeks of losses.

Dow futures lost more than 630 points, or over 1.8 percent. S&P 500 futures fell 1.6 percent while Nasdaq futures tumbled almost 1.5 percent.

September, especially the second half of the month, is historically a tough time for stocks, and this year’s proven no exception.

The Dow is more than 2.2 percent lower for the month, while the S&P 500 is down over 2 percent and the Nasdaq is more than 1.4 percent lower.

Investors are also likely concerned about ripple effects of the crackdown in China on the property development market. Hong Kong stocks saw a major sell-off earlier Monday with the Hang Seng index plunging more than 3 percent.

Embattled developer China Evergrande Group has warned investors of cash-flow problems and that it may default on its debt obligations, which analysts at UBS have pegged at about 6.5 percent of the total debt held by China’s property sector.

A default of that size could spill over into other sectors and hit companies in other countries.

Stocks.
Dow futures lost more than 630 points or over 1.8 percent.
Michael Nagle/Bloomberg via Getty Images

In the US, investors are also preparing for the Federal Reserve’s September meeting this week in which officials might signal it’s ready to taper its bond-buying program that’s given stocks a lift throughout the pandemic.

And COVID-19 cases remain worryingly high as much of the country approaches autumn, when infections flared up last year.

By sector, energy was hit particularly hard as the West Texas Intermediate benchmark for crude oil dropped more than 2 percent. Occidental Petroleum, Hess and Devon Energy all fell more than 4 percent.

Laredo Petroleum fell almost 8 percent while Callon Petroleum dropped more than 5 percent.

The financial sector was hit, too, with JP Morgan, Citi Bank, Goldman Sachs and Bank of America all down almost 3 percent in premarket trading.

New York Stock Exchange.
Investors are likely concerned about ripple effects of the crackdown in China on the property development market.
Spencer Platt/Getty Images

Nucor Steel, which has outperformed the market so far this year, and US Steel both dropped more than 5 percent in the premarket, with peer Steel Dynamics down almost 4 percent.

Mike Wilson, Morgan Stanley’s chief US equity strategist, said in a note to clients Monday that the market could be headed for a 20-percent correction.

Downward earnings revisions, weak consumer confidence and the tapering of federal stimulus, among other factors, could all make for a tough transition back to a post-pandemic economy, he said.

“Given the extraordinary fiscal stimulus during this recession, we are concerned that the inevitable deceleration in growth will be much worse than what is currently expected,” he said.

On Friday, The University of Michigan’s September consumer sentiment index came in just barely higher than August’s level, which was the lowest in nine years.