Evergrande<\/a>, one of China\u2019s biggest real estate developers, which looks like it may be unable to repay its debts.<\/p>\n\n\n\nMany analysts say they expect China\u2019s government to prevent a blowup serious enough to cause losses to cascade through markets. But any hint of uncertainty may be enough to upset Wall Street, after the S&P 500 has glided higher in almost uninterrupted fashion since October.<\/p>\n\n\n\n
The Hang Seng, Hong Kong\u2019s main index, dropped 3.3% for its biggest loss since July. Many other markets in Asia were closed for holidays. European markets fell about 2%.<\/p>\n\n\n\n
\u201cWhat\u2019s happened here is that the list of risks has finally become to big to ignore,\u201d said Michael Arone, chief investment strategist at State Street Global Advisors. \u201cThere\u2019s just a lot of uncertainty at a seasonally challenging time for markets.\u201d<\/p>\n\n\n\n
Besides Evergrande, several other worries have been lurking underneath the stock market\u2019s mostly calm surface. The Federal Reserve may soon announce it\u2019s letting off the accelerator on its support for the economy, Congress may opt for a destructive game of chicken before allowing the U.S. Treasury to borrow more money and the COVID-19 pandemic continues to weigh on the global economy.<\/p>\n\n\n\n
Regardless of what the biggest cause for Monday\u2019s market swoon was, some analysts said such a decline was due. The S&P 500 hasn\u2019t had even a 5% drop from a peak since October, and the nearly unstoppable rise has left stocks looking more expensive and with less room for error.<\/p>\n\n\n\n
All the concerns have pushed some on Wall Street to predict upcoming drops for stocks. Morgan Stanley strategists said Monday that conditions may be ripening to cause a fall of 20% or more for the S&P 500. They pointed to weakening confidence among shoppers, the potential for higher taxes plus inflation to eat into corporate profits and other signs that the economy\u2019s growth may slow sharply.<\/p>\n\n\n\n
Even if the economy can avoid that worse-than-expected slowdown, Morgan Stanley\u2019s Michael Wilson said stocks could nevertheless drop about 10% as the Fed pares back on its support for markets. The Fed is due to deliver its latest economic and interest rate policy update on Wednesday.<\/p>\n\n\n\n
Earlier this month, Stifel strategist Barry Bannister said he expects a drop of 10% to 15% for the S&P 500 in the final three months of the year. He cited the Fed\u2019s tapering of its support, among other factors. So did Bank of America strategist Savita Subramanian, as she set a target of 4,250 for the S&P 500 by the end of the year. That would be a 4.1% drop from Friday\u2019s close.<\/p>\n\n\n\n
Investors will have a chance for a closer look at how the slowdown affected a wide range of companies when the next round of corporate earnings begins in October. Solid earnings have been a key driver for stocks, but supply chain disruptions, higher costs and other factors could make it more of a struggle for companies to meet high expectations.<\/p>\n\n\n\n
\u201cThe market\u2019s biggest strength this year could become its biggest risk,\u201d Arone said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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