Wall Street ends lower on bleak China data

Amruta Khandekar and Noel RandewichReuters
Some investors worry aggressive interest rate hikes could tip the US economy into recession.
Camera IconSome investors worry aggressive interest rate hikes could tip the US economy into recession. Credit: AP

Wall Street has ended lower, with energy stocks rallying and Tesla and other growth stocks losing ground after downbeat Chinese economic data added to worries about a global slowdown and rising interest rates.

China's economic activity cooled sharply in April as widening COVID-19 lockdowns took a heavy toll on consumption, industrial production and employment, adding to fears the economy could shrink in the second quarter.

However, energy stocks got a lift from optimism that China would have significant demand recovery after positive signs that coronavirus pandemic was receding in the hardest-hit areas.

The S&P 500 energy index rallied to a 2014 intra-day high and it was the strongest performer among 11 sector indexes.

Investors questioned whether a strong day on Wall Street last Friday might signal the end of a recent sell-off that has left the S&P 500 down about 16 per cent from its record high close in January.

"After the big rally on Friday, people are looking around and asking whether it feels sustainable," said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky.

"Does it feel like the momentum thrust you would see coming off of a low, or is there still more of a capitulation to be worked out?"

Many of Wall Street's megacap growth stocks were lower, with Amazon and Google-owner Alphabet losing ground and weighing on the S&P 500 and Nasdaq.

Twitter extended losses after Bloomberg reported that Elon Musk said a deal to buy the social media company at a lower price than his previously agreed $US44 billion ($A63 billion) was "not out of the question".

Tesla, which Musk leads, also fell.

The S&P 500 healthcare sector index rose, lifted by a jump in Eli Lilly & Co after the drugmaker won US approval for tirzepatide to treat adults with type 2 diabetes.

Investors have been worried that aggressive interest rate hikes by the US Federal Reserve to combat decades-high inflation could tip the economy into a recession, with the conflict in Ukraine, supply chain snarls and the pandemic-related lockdowns in China exacerbating the economic troubles.

Data on Monday showed factory activity in New York state slumped in May for the third time this year amid a collapse in new orders and shipments.

Traders are now pricing a near 86 per cent chance of a 50-basis-point hike by the Fed in June.

The S&P 500 lost 15.24 points, or 0.38 per cent, to end at 4,008.65 points, while the Nasdaq Composite lost 140.81 points, or 1.19 per cent, to 11,664.19 and the Dow Jones Industrial Average rose 39.07 points, or 0.12 per cent, to 32,235.73.

Investors are focused on retail sales data due on Tuesday following worrying inflation and consumer sentiment data last week.

Retailers including Walmart Inc, Home Depot and Target Corp are due to report their quarterly results this week.

Spirit Airlines rallied after JetBlue Airways launched a hostile takeover bid for the discount carrier.

JetBlue shares slipped while shares of rival bidder Frontier Group gained.

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