US shares knocked by Tesla, megacap stocks

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The S&P 500 and tech-heavy Nasdaq have fallen, led by declines in some megacap growth stocks and Tesla, with optimism around China further easing its COVID-19 curbs limiting losses on the indexes.

Tesla slid five per cent after reports the electric vehicle maker plans to extend a reduced production schedule at its Shanghai plant into January.

Megacap growth stocks Apple, Alphabet and Amazon slipped between one per cent and two per cent on Tuesday, dented by a rise in US Treasury yields.

The drops made consumer discretionary and technology the worst performers among major S&P 500 sector indexes.

China said it would stop requiring inbound travellers to go into quarantine starting January 8, adding it would also downgrade the seriousness of COVID-19 as it has become less virulent.

US-listed shares of Chinese firms such as JD, Alibaba and Pinduoduo climbed between four per cent and 5.4 per cent.

Casino operators Las Vegas Sands, Wynn Resorts and Melco Resorts & Entertainment gained between 2.2 per cent and 4.7 per cent.

China’s move comes after three years of zero-tolerance measures battering the country’s economy and follows an abrupt policy U-turn this month of dropping nearly all domestic COVID-19 restrictions.

Sam Stovall, chief investment strategist at CFRA Research in New York, says it’s hoped China’s economy will see a benefit next year.

“With China opening up and being less restrictive, the hope is that China will show an increase in GDP growth in 2023 – one of the few countries to actually show an increase in economic activity for the year ahead,” he said.

With a handful of trading sessions left this year, investors are hoping for a so-called “Santa rally” at the end of what has been a largely disappointing month for US equities.

The S&P 500 and the Nasdaq have lost around six per cent and nine per cent, respectively, so far in December and are on track for their biggest yearly loss since 2008 on worries that the Federal Reserve’s aggressive policy tightening to tame decades-high inflation could trigger a recession.

Economic data so far has offered little hope that the Fed could hit the brakes on its interest rate hikes. Inflation has cooled further, but not enough to discourage the US central bank from driving rates to higher levels next year.

Money markets are pricing in 59 per cent odds of a 25-basis-point interest rate hike at the Fed’s February meeting and expect rates peaking at 4.94 per cent in May.

Trading volumes remain thin as investors return from a long weekend.

At 9.39am local time on Tuesday, the Dow Jones Industrial Average was down 4.94 points, or 0.01 per cent, at 33,198.99, the S&P 500 was down 14.55 points, or 0.38 per cent, at 3,830.27, and the Nasdaq Composite was down 87.26 points, or 0.83 per cent, at 10,410.61.

Southwest Airlines shed five per cent after cancelling thousands of flights, piling more pressure on the S&P 500.

AMC Entertainment slipped 8.6 per cent, extending declines after the cinema chain disclosed plans for a capital raise last week.

Declining issues outnumbered advancers for a 1.69-to-1 ratio on the NYSE and 1.93-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and one new low, while the Nasdaq recorded 33 new highs and 144 new lows.

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