Stocks Finish Mixed as Energy Rallies

U.S. stocks wobbled Monday, bond yields rose and oil hit its highest level in nearly three years as investors bet on further economic reopening but remained concerned about supply-chain disruptions.

Oil prices rose as supply constraints continued to draw on inventories around the world and the rally in natural gas prices also pushed up crude, according to ANZ Research analysts. Global benchmark Brent crude gained 2.1% to $78.81 a barrel in midday trading, hitting the highest level since October 2018.

The S&P 500 lost 0.3%. The Dow Jones Industrial Average ticked up 0.2% while the tech-heavy Nasdaq Composite Index fell 0.5%.

Stocks swung last week as fears about Evergrande’s debt problems weighed on markets. Despite the Chinese property developer missing a bond coupon payment, the S&P 500 still finished the week up 0.5%. Federal Reserve Chairman Jerome Powell helped boost confidence when he said the U.S. economy has recovered sufficiently for the central bank to potentially announce the start of bond-purchase tapering at its next meeting. 

“We’re easing off that extremely accommodative monetary policy stance as growth improves and we see higher inflation,” said Amy Magnotta, co-head of discretionary portfolios at Brinker Capital Investments. “Then when the economy should meet the Fed’s target of growth and employment perspective, we could see further tightening in rising interest rates.”

Technology stocks are particularly sensitive to rising interest rates. Facebook Inc. shares recovered after being dragged down in early trading by the California-based social media giant announcing Monday it will pause the development of its Instagram for kids project.

Meanwhile, Alphabet Inc. ’s Google started its appeal Monday to overturn a $5 billion antitrust fine imposed by the European Union, contending that its Android operating system for mobile devices has boosted competition rather than foreclosing it. Shares declined 0.8%.  

Shares of energy stocks gained. Occidental Petroleum Corp. jumped 7.4%, Marathon Oil Corp. rose 6.2% and Valero Energy Corp. climbed 4.6%. Travel stocks also rallied with shares of Carnival Corp. , Royal Caribbean Group and Norwegian Cruise Holdings Ltd. all gaining.

Special-purpose acquisition company Gores Guggenheim rose 5.3% after it agreed to merge with Swedish electric-vehicle maker Polestar in a $21 billion deal

Fresh data showed a 1.8% rise in new U.S. orders for durable goods in August, stronger than economists expected, as business investment and consumer spending picked up.

Bitcoin climbed 1% compared with its level at 5 p.m. Friday, recovering some ground after a steep decline prompted by the Chinese government outlawing cryptocurrency transactions. The digital currency traded around $43,500. 

The yield on the 10-year benchmark U.S. Treasury note ticked up to 1.482% Monday from 1.459% Friday, reaching the highest intraday level since June. This extended into a fifth day a rise that drove the biggest weekly increase since March.

Some investors say that cyclical stocks rallying in the face of rising interest rates shows that the economy is on a path to sustainable growth. “That’s really the next leg, can more cyclical oriented companies continue to grow earnings at the same pace coming out of the cyclical trough post-Covid?” said Tom Graff, head of fixed income and portfolio manager at Brown Advisory.

Pullbacks also can make overvalued stocks more affordable, some market participants said. “If you see these attractive names pull back, you are definitely going to use that as an opportunity to buy in,” said Sara Rajo-Miller, financial adviser and director at Miracle Mile Advisors. “They are still good names that people want to own.”

Investors also are closely monitoring the outcomes of many high-stakes deadlines on Capitol Hill this week, setting up potentially chaotic negotiations against the backdrop of expiring government funding and the threat of a possible U.S. default.

“The sooner something there [Capitol Hill] happens, the happier the market will be,” said JJ Kinahan TD Ameritrade’s chief market strategist. “Watching the sausage being made is always a really ugly process.”

Evergrande, China’s most indebted property developer, has kept global markets on edge and sparked protests at home as it struggles to survive. WSJ explains why the company’s crisis is raising questions about the state of the world’s second-largest economy. Photo: Alex Plavevski/Shutterstock

In Asia, major benchmarks were mixed Monday. The Shanghai Composite Index slipped 0.8%, while Hong Kong’s Hang Seng Index edged up less than 0.1%. Evergrande shares rallied around 8%, but remained down more than 80% for the year. China Evergrande New Energy Vehicle Group, a subsidiary of the Evergrande parent company, scrapped plans to list on the Shanghai Stock Exchange.

Hong Kong-listed shares of Sunac China, another major property developer, dropped 9.3% and closed at their lowest in more than four years. Investors grew concerned that the company could run into similar problems as Evergrande, after a document circulated that showed a Sunac unit asking for government help to ease its liquidity difficulties.

The DAX, Germany’s benchmark stock index, rose 0.3%. Germans voted for a new chancellor over the weekend. The initial results showed a tight race that will likely mean lengthy coalition talks and no major changes to policy, according to Peter Schaffrik, a global macro strategist at RBC Capital Markets. 

The pan-continental Stoxx Europe 600 retreated 0.2%, with stocks that benefit from the loosening of pandemic restrictions gaining.

Fresh data showed a 1.8% rise in new U.S. orders for durable goods in August.

Photo: andrew kelly/Reuters

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

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