U.S. stocks try to shake off rising yields as equities face losing September

What’s driving markets

A rapid climb in long-term interest rates continued to set the tone across markets, decreasing the present value of future corporate earnings and weighing on stocks. The yield on the 10-year Treasury
BX:TMUBMUSD10Y
briefly rose by more than 9 basis points to touch 4.53% and was on track for its highest close since Oct. 17, 2007.

Read: Stock market’s September drop may be tied to more than a surge in Treasury yields, says DataTrek

“Markets walked away from last week’s Federal Reserve meeting with more confidence that rates will be higher for longer, and that’s putting downward pressure on equities,” said Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta, which oversees about $2.5 billion.

Another factor stoking concerns about the outlook is oil prices, which have risen sharply since summer. Brent crude
BRN00,
+0.07%,
the global benchmark, and West Texas Intermediate crude
CL00,
-0.12%,
the U.S. benchmark, are both near $90 a barrel.

“Inflation seems stickier, and a lot of news has turned not as positive,” Buchanan said via phone. That’s adding to concerns that the stock market, which has rallied over the past year, “is at a challenging level to continue to post gains.”

See also: Stock investors face a wall of worry into year’s end, creating the need for protection

Meanwhile, the U.S. government is barreling toward a partial shutdown Sunday morning. While stocks have managed to withstand similar scenarios before, “there’s growing concern over the potential that this could be a little bit more impactful than shutdowns in the past,” Buchanan said. “The market is becoming more aware of the potential for a more drawn-out shutdown.”

Market bulls nonetheless remain confident that the stock market’s pullback from its late July highs remains a “garden variety” correction. The S&P 500 remains up more than 12% this year.

“We are expecting a 5% to 10% pullback in the S&P 500 from its late July high, but we don’t see the S&P 500 falling meaningfully below 4,200. That level puts us right in the sweet spot of a correction, and it’s also near the index’s 200-day moving average, so we have good support at 4,200,” said Mary Ann Bartels, chief investment strategist at Indianapolis-based Sanctuary Wealth, which manages $25 billion in assets.

“We are buyers of this pullback, especially if the S&P 500 falls near 4,200,” Bartels said in emailed comments.

On the labor front, union leaders and Hollywood studios reached a tentative deal Sunday to end a historic screenwriters strike after nearly five months. No deal appeared in the works, however, for striking actors.

Separately, President Joe Biden is expected to join United Auto Workers union members on the picket line on Tuesday in Michigan as they strike against the Big Three automakers — Ford Motor Co.
F,
+1.73%,
General Motors Co.
GM,
+1.47%
and Chrysler owner Stellantis NV
STLA,
-0.93%.

UAW strike: Labor leaders stand with striking workers

The housing crisis in China was back in the news, with Evergrande shares
3333,
-21.82%
slumping 21.8% as the company scrapped a debt-restructuring plan, while shares of China Aoyuan Group
3883,
-72.46%
dropped 72.5% on Monday in their first day of trading in more than a year. The Hang Seng
HK:HSI
finished 1.8% lower in Hong Kong trading.

Companies in focus

• The tentative end of the Hollywood writers strike was unable to lift media companies like Warner Brothers Discover Inc.
  WBD,
  -2.66%,
  Paramount Global
  PARA,
  -0.55%
  and Walt Disney Co.
  DIS,
  -0.39%.
  Shares of all three were lower, failing to follow through on premarket gains. Netflix Inc. shares
  NFLX,
  +0.96%,
  however, were higher.

• Amazon.com Inc.
  AMZN,
  +1.66%
  said on Monday that it would invest up to $4 billion in artificial-intelligence startup Anthropic and take a minority stake in the company to accelerate the development of its future foundation models and make them accessible to customers of its cloud business, AWS. Amazon shares rose 1.6%.

Steve Goldstein contributed.