By Amruta Khandekar and Noel Randewich
(Reuters) - The S&P 500 ended lower on Monday, with Tesla (NASDAQ:TSLA) 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 see 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 closed up 2.6%, making it 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% 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 (NASDAQ:AMZN) and Google-owner Alphabet (NASDAQ:GOOGL) losing more than 1% and weighing on the S&P 500 and Nasdaq.
Twitter (NYSE:TWTR) fell more than 8% after Bloomberg reported that Elon Musk said a deal to buy the social media company at a lower price than his previously agreed $44 billion was "not out of the question."
Tesla, which Musk leads, fell almost 6%.
The S&P 500 healthcare sector index rose 0.7%, lifted by a 2.7% jump in Eli Lilly (NYSE:LLY) & Co after the drugmaker won U.S. approval for tirzepatide, to treat adults with type 2 diabetes.
Graphic: S&P 500 components - https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwemagvo/SPX_by_marketcap.png
Investors have been worried that aggressive interest rate hikes by the U.S. 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% chance of a 50-basis-point hike by the Fed in June.
Unofficially, the S&P 500 declined 0.39% to end the session at 4,008.01 points.
The Nasdaq declined 1.20% to 11,662.79 points, while Dow Jones Industrial Average rose 0.08% to 32,223.42 points.
Investors are focused on retail sales data due on Tuesday, following worrying inflation and consumer sentiment data last week.
Retailers including Walmart (NYSE:WMT) Inc, Home Depot (NYSE:HD) and Target Corp (NYSE:TGT) are due to report their quarterly results this week.
Spirit Airlines rallied 13.5% after JetBlue Airways launched a hostile takeover bid for the discount carrier. JetBlue shares slipped 6.1%, while shares of rival bidder Frontier Group gained almost 6%.
Advancing issues outnumbered declining ones on the NYSE by a 1.08-to-1 ratio; on Nasdaq, a 1.35-to-1 ratio favored decliners.
The S&P 500 posted one new 52-week high and 31 new lows; the Nasdaq Composite recorded 17 new highs and 190 new lows.
Volume on U.S. exchanges was 11.3 billion shares, compared with a 13.2 billion average over the last 20 trading days.