U.S. stocks slipped on Monday as a surprise interest rate hike from China’s central bank over the weekend prompted investors, worried about demand, to sell equities.
China’s central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation. The People’s Bank of China said it will raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.
“In the long run, this is going to be healthy for the Chinese economy, but the instinctive market reaction is that this is going to be bad for global demand, giving investors a reason to sell off equities,” said Quincy Krosby, market strategist with Prudential Financial in Newark, New Jersey.
Trading volumes, already light for the holiday season, are expected to be even thinner as a winter blizzard moved across the northeastern United States on Monday. The storm and its aftermath disrupted air and rail travel and forced motorists to deal with blowing snow and icy roads after the busy Christmas weekend.