Benchmark S&P 500 Index Struggles as China COVID Cases Rise; Disney Soars

The major U.S. stock indexes are drifting lower shortly before the cash market opening on Monday at the start of this holiday shortened week.

Helping to cap gains are concerns over slowing growth due to increasing COVID cases in China and uncertainty over Fed policy. The Dow and S&P 500 Indexes, however, are getting a slight lift from a jump in shares of Disney.

At 13:30 GMT, blue chip Dow Jones Industrial Average futures are trading 33757.00, down 18.00 or -0.05%. The benchmark S&P 500 Index is at 3961.00, down 13.00 or -0.33% and the tech-heavy NASDAQ Composite is trading 11650.75, down 57.25 or -0.49%.

COVID-Fueled Demand Destruction in China Pressuring Stocks Overnight

Rising COVID cases in China and reports of three deaths in the country are raising concerns over economic growth. Some investors are worried that a lengthy shutdown of certain regions could drive China into recession and consequently the United States, its biggest trading partner.

Reuters is reporting that New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide and in major cities. Schools in some districts in the capital Beijing switched to online classes on Monday after officials asked residents to stay home, while the southern city of Guangzhou ordered a five-day lockdown for its most populous district.

Uncertainty Over Fed Policy Encouraging Investors to Trim Positions

U.S. stocks are consolidating near the low end of its five-day trading range on Monday as uncertainty builds regarding the size and duration of future Federal Reserve interest rate hikes.

After rallying to a multi-month high early last week on bets of a 50-basis point rate hike by the Fed at its December meeting, prices are drifting sideways-to-lower. The catalyst behind the potentially bearish price action is hawkish comments from several Fed officials, especially St. Louis Fed President James Bullard.

Bullard spiked prices lower last week when he said the Fed’s target policy needs to rise to at least a range between 5.00% and 5.25% from the current level of just below 4.00% to be “sufficiently restrictive” to curb inflation, though he would defer to Fed Chair Jerome Powell regarding how much higher to move rates at upcoming policy meetings.

That comment alone was enough to encourage investors to take a little of their money off the table.

Disney Shares Jump 9% in the Premarket Session

Helping to give the Dow and the S&P 500 Index a slight boost on Monday is a sharp rise in shares of Disney.

Walt Disney Company soared 9% in premarket trading as Bob Iger returned as CEO less than a year after he retired.

The move was fueled by the need for the entertainment company to boost investor confidence and profits at its streaming media unit.