U.S. stocks lost ground in early trade Monday, pulling back from records after China took a series of steps pointing to further tensions between the world’s top two economies.

Investors were also preparing for a meeting of Federal Reserve policy makers. A deluge of corporate earnings reports, including results from Big Tech heavyweights, are also in the pipeline this week and could set the tone, analysts said.

What are major indexes doing?

The Dow Jones Industrial Average
DJIA,
-0.27%

was down 64.10 points, or 0.2%, at 34,997.45.

The S&P 500
SPX,
-0.10%

was down 1.29 points, less than 0.1%, at 4,410.50.

The Nasdaq Composite
COMP,
+0.08%

shed 10.68 points, or 0.1%, to trade at 14,826.31.

The decline came after a week that saw U.S. benchmarks bounce back sharply from a July 19 tumble to end Friday at records. The S&P 500 on Friday rose 2% to finish at its 40th record close of 2021, and the tech-heavy Nasdaq Composite rose 2.8%. The Dow also pushed to a record close Friday, finishing above the 35,000 milestone for the first time.

What’s driving the market?

A softer tone across global equity markets was tied to China, as the Hang Seng
HSI,
-4.13%

skidded over 4%, following a crackdown both on Tencent’s music licensing and the entire tutoring industry. In premarket trade, Tencent Music Entertainment
TME,
-1.58%

shares dropped 14% after China ordered the company to end exclusive contracts with music copyright holders.

Hong Kong-listed education stocks skidded after educational training institutions were banned from raising money in the stock market and foreign capital cannot invest. The crackdown slammed U.S.-listed Chinese education stocks on Friday.

The crackdown came as China blamed the U.S. for a stalemate in bilateral relations as high-level talks began in the Chinese city of Tianjin.

But earnings may soon be back in the spotlight. with results due this week from major tech companies including Alphabet Inc.
GOOG,
+0.25%

GOOGL,
-0.18%
,
Amazon.com Inc.
AMZN,
+1.08%
,
Apple Inc.
AAPL,
+0.38%
,
Facebook Inc.
FB,
+0.44%

and Microsoft Corp.
MSFT,
-0.93%
.

“The earnings season is now in full throttle and thus far continues to surprise to the upside, as most companies are reporting better than expected top and bottom-line results,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in a note.

“Despite the ‘fear factor’ over the virus, and a lasting inflation which at times may cause minor hiccups, we see the summer rally continuing with the indices possibly headed higher by another 5%,” he said.

The U.S. earnings calendar includes electric-vehicle maker Tesla Inc.
TSLA,
+2.76%
,
which reports after the close on Monday. This week also will see the latest Federal Reserve interest-rate decision and the gross domestic product report for the second quarter.

Bitcoin
BTCUSD,
+11.57%

jumped Monday after Amazon ran an advertisement looking for an individual to lead the retailer’s cryptocurrencies effort. A separate report said Amazon was looking to start accepting bitcoin for payment by the end of the year.

Which companies are in focus?

Shares of Hasbro Inc.
HAS,
+9.56%

rose more than 9% after the toy maker reported a second-quarter adjusted profit that was more than double what was expected, with revenue lifted by strength in franchise brands and Wizards of the Coast and digital gaming.

Aon PLC
AON,
+7.39%

and Willis Towers Watson PLC
WLTW,
-6.99%

on Monday announced a mutual agreement to terminate their $30 billion merger deal and end litigation with the U.S. Justice Department. Aon shares rose 6.5%, while Willis Towers Watson was off 5.5%.

Popular meme stock AMC Entertainment Holdings Inc.
AMC,
+8.08%

rose 2.5%, while GameStop Corp.
GME,
+2.02%

edged down 0.6%.

What are other markets doing?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.280%

fell 1.2 basis points to 1.268%. Yields and bond prices move in opposite directions.

The ICE U.S. Dollar Index
DXY,
-0.39%
,
a measure of the currency against a basket of six major rivals, was off 0.1%.

Oil futures traded lower, with the U.S. benchmark
CL00,
+0.17%

down 0.7%, while gold futures
GC00,
-0.18%

were marginally lower.

In European equities, the Stoxx Europe 600
SXXP,
-0.08%

and London’s FTSE 100
UKX,
+0.09%

each edged down 0.1%.

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