US stocks climb after Evergrande sell-off as investors look to Fed meeting

Traders work at the trading floor in the New York Stock Exchange in New York, the United States, Aug. 19, 2021.

US stocks rebounded on Tuesday as investors recovered from the massive sell-off sparked by beleaguered Chinese developer Evergrande and looked to the Federal Reserve’s two-day Federal Open Market Committee meeting beginning today.

The Dow Jones Industrial Average climbed about 140 points following its biggest drop since May. The tech-heavy Nasdaq 100 and benchmark S&P 500 both gained as well.

Here’s where US indexes stood at the 9:30 a.m. ET open on Tuesday:

“China’s market is opaque and unpredictable and the stock market doesn’t react well to those characteristics, which is one reason why Monday’s selloff was so dramatic,” George Ball, chairman of Sanders Morris Harris, an investment firm, said in a note. “We know so little about China’s economy and its inner workings.”

Evergrande, China’s second-largest property developer, has more than $US300 ($AU413) billion in liabilities and could miss key interest payments due Thursday. There are no signs yet that the Chinese government will step in to save the company.

Fears about Evergrande collapsing and hurting the broader Chinese economy sent global stocks sliding on Monday.

In addition to worries about Evergrande’s potential to spark further risk to the global financial system, investors are anxious about the Federal Reserve’s potential tapering of stimulus and the risk of a prolonged period of inflation, Ball said.

While several analysts, including those at BlackRock Investment Institute, do not expect Fed Chair Jerome Powell to announce any policy change this month, they are still keeping a close eye on any signal of how he plans to scale back monetary support, which includes tapering asset purchases.

“We expect the Fed to start normalizing policy rates in 2023, a much slower pace than market pricing for lift-off in 2022 indicates,” the BlackRock analysts said in a note.

They added that Powell assured the investors during the annual Jackson Hole symposium that he will give a strong signal that one will come before year-end if employment gains keep up.

Elsewhere, WeWork is planning to make its stock-market debut sometime in October, more than two years after its original IPO attempt failed. The shared-workspace company agreed in March to go public via a merger with SPAC BowX Acquisition Corp.

Bitcoin edged higher above $US43,000 ($AU59,235) after a broader cryptocurrency sell-off Monday.

Oil prices rebounded. West Texas Intermediate crude climbed as much as 1.01%, to $US71.00 ($AU98) per barrel. Brent crude, oil’s international benchmark, fell 1.79%, to $US73.99 ($AU102) per barrel.

Gold jumped as much as 0.47%, to $US1,773.45 ($AU2,443) per ounce.