US stocks fall after gloomy earnings forecasts: Markets Wrap

(Bloomberg) – US equities fell at the start of a busy week for corporate earnings as investors closely monitor results to gain insight into the effects of inflation and consumer spending as the Federal Reserve escalates policy tightening.

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The S&P 500 fell 1.9% and the Nasdaq 100 fell 3.1% as General Electric Co. fell. dropped a disappointing profit forecast on supply chain problems. Twitter Inc. fell after Elon Musk sealed a deal to buy the social media platform. Meanwhile, government bonds, dollar and oil prices all rose, while European gas rose sharply following reports of a halt in flow.

The prospect of a slower economic expansion together with sustained inflation leads to a feverish mood in the markets. The panoply of risks spans the pandemic, supply chain disruptions, Fed austerity and Russia’s fierce war in Ukraine. The search for portfolio buffers in the US is evident in the highest relative cost of loss-making put contracts for two years.

“There is no doubt that economic growth is in trouble and that the path for central banks to manage a soft landing is shrinking as wages and inflation rise,” said Lauren Goodwin, an economist and portfolio strategist at New York Life Investments. “The big question for asset allocation is not whether inflation will be high. It’s a given. Instead, it is whether growth can keep up. ”

US corporate earnings provide some consolation to stock owners – close to 80% of companies have beaten profit expectations including GE, United Parcel Service Inc. and Pepsico Inc. But disappointing forecasts, including those from JetBlue Airways Corp., weigh on stocks. Results from Microsoft Corp., Google’s parent company Alphabet Inc. and Visa Inc. still missing.

“This is going to be the busiest week with reports for the first quarter earnings season,” Art Hogan, chief marketing strategist at National Securities, said in a note. “This should give investors an opportunity to shift their focus from the macroeconomic headwinds such as inflation, the Fed, China’s shutdowns and the war in Ukraine and allow them to disseminate corporate performance to determine whether appropriate valuations have been attributed in the wake of markets withdrawal in April. “

China Boost

Shares in Europe followed those in the U.S. lower and erased gains earlier in the session from positive corporate performance and a mood boost from China’s pledge to support its Covid-hit economy.

Most of Beijing is being tested for the virus, raising fears of an unprecedented shutdown that could drag on global growth. However, Dennis DeBusschere, founder of 22V Research, said the concern over inflationary pressures may be exaggerated.

“There is no amplifying supply chain pressure from other key supply chain countries as in 2021,” he said. “There is generally a softer consumer demand, service spending is recovering (moderating commodity spending), and the USD is moving higher.”

An Asian-Pacific stock index rose for the first time in four sessions amid a 3% jump in technology stocks in Hong Kong. Stock markets on the Chinese mainland fell, but avoided the kind of dive seen on Monday. The yen moved up below short coverage.

What will be the peak in 2022 in US 10-year interest rates, and in what quarter will it happen? And which rock or pop song best encapsulates the Fed’s monetary policy? Get involved in this week’s MLIV Pulse survey by clicking here. Participation takes one minute and is anonymous.

Events to see this week:

  • Technological earnings include Alphabet, Meta Platforms, Amazon, Apple

  • EIA oil inventory report, Wednesday

  • Australia CPI, Wednesday

  • Bank of Japan’s Monetary Policy Decision, Thursday

  • US 1st Quarter GDP, Weekly Unemployment Applications, Thursday

  • The ECB will release its financial bulletin on Thursday

Some of the key movements in markets:

Equities

  • The S&P 500 fell 1.8% at 11:18 New York time

  • Nasdaq 100 fell 3 percent.

  • The Dow Jones Industrial Average fell 1.4 percent.

  • Stoxx Europe 600 fell 0.8 percent.

  • The MSCI World Index fell 1.4 percent.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4 percent.

  • The euro fell 0.5% to $ 1.0656

  • The British pound fell 0.9% to $ 1.2624

  • The Japanese yen rose 0.7% to $ 127.28 per dollar

Bonds

  • The yield on 10-year government bonds fell by eight basis points to 2.74%

  • Germany’s 10-year interest rate fell four basis points to 0.80%

  • The UK’s 10-year interest rate fell five basis points to 1.79%

Raw materials

  • West Texas Intermediate crude rose 2.4% to $ 100.90 per barrel. barrel

  • Gold futures rose 0.4% to $ 1,904.10 per share. ounce

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