Dow falls 700 points, Nasdaq falls ahead of megacap tech revenues

US stocks traded sharply lower on Tuesday afternoon, failing to build on the setback of the previous session, as investors review a number of company results and await performance reports after the bell from technology giants including Microsoft Corp. and Google mother Alphabet Inc.

How do stock indices perform?
  • Dow Jones Industrial Average DJIA
    fell almost 736 points, or 2.2%, to around 33,314.

  • S&P 500 SPX
    fell around 110 points, or 2.6%, to 4,186.

  • Nasdaq Composite COMP
    lost 475 points, or 3.7%, to trade around 1[ads1]2,530.

Monday saw the biggest intraday reversal since February for the Dow, which rose 238 points, or 0.7%, erasing a loss of nearly 500 points. The S&P 500 was up 0.6% and the Nasdaq Composite was up 1.3%.

Also read: US stocks ended a manic Monday in the green – but intraday bounce like this is not bullish

What drives the markets?

Shares fell on Tuesday afternoon, with all three major benchmarks down after Monday’s rally.

“Investors are not necessarily confident” in the strength of the market, with “fragility” on display since the beginning of the year, said Aoifinn Devitt, Moneta’s chief investment officer, in a telephone interview on Tuesday. “There is a fear of slowing down growth.”

CBOE Volatility Index VIX
jumped nearly 18% to nearly 32 Tuesday afternoon, according to FactSet data. It can be compared to a 200-day moving average of around 21.

Discretionary consumer XX: SP500,
information technology XX: SP500
and communication services XX: SP500
were the hardest hit sectors in the S&P 500 in early afternoon trading on Tuesday, according to FactSet data. Technology and communications services had the strongest performance for the S&P 500 in Monday’s stock exchange rally.

“Now we have this release today,” Devitt said. “The markets are trying to figure out a level.”

The S&P 500 is trading not far from the last low of this year at 4,170.70 on March 8, according to Dow Jones Market Data. Nasdaq traded below the 2022 closing level of 12,581.22, hit March 14, according to FactSet data, at the last check.

U.S. stocks fell as investors moved into the busiest week of the U.S. corporate reporting season, digesting results from a number of heavyweights from companies released before the opening. They are also looking forward to results from the megacap technology company Microsoft Corp. MSFT
and Google’s parent Alphabet Inc. GOOG
after the closing clock.

Technical giants are “big moves in the market,” Paul Nolte, a portfolio manager at Kingsview Investment Management, said by telephone on Tuesday. Both the S&P 500 and the Nasdaq are “dramatically affected by technology.”

Formerly the high-flying Netflix NFLX
the shares have fallen more than 40% since last week announced that they had lost 200,000 subscribers in the first quarter.

While around 80% of companies so far have reported earnings for the quarter, beating earnings expectations, including General Electric Co., United Parcel Service Inc. and Pepsico Inc., weigh disappointing earnings forecasts on equities.

Read: The first major Wall Street bank to call for a recession now sees a clear risk outside that it could be “more serious”

According to US economic data, orders for US durable goods factories rose by 0.8% in March and business investment picked up again after the first decline in one year, signaling that the economy is still growing at a steady pace. The increase in orders for durable goods was in line with the consensus expectation produced by a survey of economists by The Wall Street Journal.

A survey of consumer confidence fell in April to 107.3 from 107.6, but the Americans signaled that they are optimistic about the economy to continue buying large ticket items such as news cars and appliances.

The S&P CoreLogic Case-Shiller 20-city house price index rose 20.2% year-over-year in February, up significantly from 18.9% last month, but sales of new homes in the US fell 8.6% to a annual rate of 763,000 in March, the government said Tuesday.

The Federal Reserve’s political meeting next week, meanwhile, weighs investors, who expect the central bank to announce a large interest rate hike, potentially at 50 basis points, in an attempt to tame hot inflation, according to Nolte.

“The Fed will raise interest rates until something breaks, and that will be the economy,” he said. “Concerns may increase the potential for a recession.”

Which companies are in focus?
  • Twitter Inc. TWTR
    Shares fell 3.3% on Tuesday to around $ 50 after the board on Monday agreed to accept Tesla CEO Elon Musk’s bid of $ 54.20 per share for the social media platform.

  • 3M Co. MMM
    shares fell 2.9% after the manufacturer of post-it notes and industrial equipment delivered better results than expected in the first quarter.

  • Shares in PepsiCo Inc. PEP
    rose 0.1% after delivering earnings and revenues that exceeded Wall Street’s forecasts.

  • United Parcel Service Inc. UPS
    shares fell 2.7% after the parcel delivery giant reported profits and revenue in the first quarter that beat expectations.

  • General Electric Co. GE
    The shares plunged 10.8% after the industrial conglomerate reported adjusted results and income for the first quarter, which beat expectations, but missed free cash flow and gave a somewhat worse outlook.

  • Shares in JetBlue Airways Corp. JBLU
    fell by 10.6% after the airline reported a lower-than-expected loss and revenue that more than doubled to match forecasts, but said it planned to further reduce capacity growth to restore operational reliability. United Airlines Holdings Inc. UAL
    said Tuesday that it is launching the largest transatlantic expansion in its history with 30 new or resumed flights from mid-April to early June. United Airline shares fell 4.4 percent.

How about other assets?
  • The yield on the 10-year government bond BX: TMUBMUSD10Y
    fell 5.2 basis points to 2.773%. Interest rates and debt prices move in opposite directions.

  • ICE US Dollar Index DXY,
    a measure of the currency against a basket of six major rivals, rose 0.6%.

  • Bitcoin BTCUSD
    fell 4.9% to trade around $ 38,182.

  • Oil futures CL
    ended higher, with West Texas Intermediate oil for June CLM22
    Delivery climbed 3.2% to settle at $ 101.70 a barrel.

  • Gullfutures GC00
    closed higher, with gold for June delivery GCM22
    rises 0.4% to settle at $ 1,904.10 per ounce.

  • In European equities, Stoxx Europe 600 XX: SXXP
    closed 0.9% lower, while London’s FTSE 100 UK: UKX
    increased 0.1 percent.

  • In Asia, Shanghai Composite CN: SHCOMP
    fell 1.4%, while the Hang Seng index HK: HSI
    rose 0.3% in Hong Kong and Japanese Nikkei 225 JP: NIK
    increased 0.4 percent.

—Steve Goldstein contributed to this report.

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