Dow drops 800 points, Nasdaq posts lowest close since 2020 ahead of megacap tech earnings

Benchmarks for U.S. stocks ended sharply lower on Tuesday, with the Nasdaq Composite posting its lowest close since 2020, as investors scrutinized a series of corporate results and awaited earnings reports that are came after the bell from tech giants including Microsoft Corp. and Google’s parent company Alphabet Inc..

How have stock market indices evolved?
  • The Dow Jones Industrial Average DJIA,
    fell 809.28 points, or 2.4%, to close at 33,240.18.

  • The S&P 500 SPX,
    fell 120.92 points, or 2.8%, to end at 4,175.20.

  • The Nasdaq Composite COMP,
    fell 514.11 points, or 4%, to end at 12,490.74, recording its largest daily percentage decline since September 8, 2020 and its lowest close since December 14, 2020, according to Dow Jones Market Data.

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 rose 0.6% and the Nasdaq Composite gained 1.3%.

Read also : US stocks ended a manic Monday in the green – but intraday rallies like this aren’t bullish

What stimulated the markets?

Stocks fell on Tuesday, with all three major benchmarks falling after Monday’s rally.

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

The CBOE VIX volatility index,
jumped to around 33 on Tuesday, according to FactSet data. This compares to a 200-day moving average of around 21.

Consumer Discretionary SP500.25,
computer SP500.45,
and communication services SP500.50,
were the hardest hit sectors of the S&P 500 on Tuesday, according to FactSet data. Technology and communications services posted the best performance in the S&P 500 during Monday’s stock market rally.

“Now we have that comeback today,” Devitt said. “The markets are trying to determine a level.”

The S&P 500 ended Tuesday slightly above its closing low this year of 4,170.70 on March 8, according to Dow Jones Market Data. The tech-laden Nasdaq Composite saw its lowest close since Dec. 14, 2020.

Shares fell as investors pushed further into the busiest week of the US corporate earnings reporting season, digesting results from a number of heavyweights released before the opening bell. They were also anticipating results from megacap tech company Microsoft Corp. MSFT,
and Google parent Alphabet Inc. GOOG,
which reported after the closing bell.

Tech giants are “big players in the market,” Paul Nolte, portfolio manager at Kingsview Investment Management, said by phone on Tuesday. The S&P 500 and the Nasdaq are “significantly impacted by technology”.

Nervousness around the tech has been amplified by the once top-flight Netflix NFLX performance.
shares, which have fallen more than 40% since announcing last week that it had lost 200,000 subscribers in the first quarter.

While about 80% of companies reporting earnings so far for the quarter beat their earnings expectations, including General Electric Co., United Parcel Service Inc. and Pepsico Inc., disappointing earnings forecasts weigh on stocks.

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In U.S. economic data, durable goods orders at U.S. factories rose 0.8% in March and business investment rebounded from the first decline in a year, signaling that the economy continues to grow at a steady pace. supported. The rise in durable goods orders was consistent with consensus expectations produced by a survey of economists from The Wall Street Journal.

A survey of consumer confidence fell in April to 107.3 from 107.6, but Americans indicated they were optimistic enough about the economy to continue buying big-ticket items such as new cars and household appliances.

The S&P CoreLogic Case-Shiller home price index for 20 cities posted a 20.2% year-over-year gain in February, up sharply from 18.9% the previous month, but US new home sales fell 8.6% to an annual rate of 763,000 in March, the government said Tuesday.

The Federal Reserve’s policy meeting next week is weighing on investors, who anticipate the central bank could announce a sharp rate hike, potentially 50 basis points, in a bid to tame inflation, according to Nolte. .

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

Which companies were targeted?
  • Twitter Inc. TWTR,
    Shares fell 3.9% on Tuesday to $49.68 after its board on Monday agreed to accept Tesla chief Elon Musk’s $54.20 per share offer on the platform. form of social media.

  • 3M Co. MMM,
    Shares fell nearly 3% after the maker of post-it notes and industrial equipment posted better-than-expected first-quarter earnings.

  • Shares of PepsiCo Inc. PEP,
    fell 0.25% after posting earnings and revenue that beat Wall Street forecasts.

  • United Parcel Service Inc.UPS,
    Shares fell 3.5% after the parcel delivery giant reported first-quarter earnings and revenue that beat expectations.

  • General Electric Co. GE,
    Shares plunged 10.3% after the industrial conglomerate reported first-quarter adjusted earnings and revenue that beat expectations but missed free cash flow and provided a somewhat optimistic outlook.

  • Shares of JetBlue Airways Corp. JBLU,
    fell 11.4% 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 help restore operational reliability. United Airlines Holdings Inc. UAL,
    said on Tuesday it was launching the biggest transatlantic expansion in its history with 30 new or resumed flights between mid-April and early June. United Airlines shares fell 4.8%.

How have other assets performed?
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    fell 5.2 basis points to 2.773%. Yields and debt prices move in opposite directions.

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

  • BitcoinBTC USD,
    was down 5.3% to around $38,018.

  • CL.1 Oil Futures Contracts,
    ended higher, with West Texas Intermediate crude for June CLM22,
    delivery climbing 3.2% to $101.70 a barrel.

  • GC00 gold futures,
    closed higher, with gold for June delivery GCM22,
    up 0.4% to $1,904.10 an ounce.

  • In European equities, the Stoxx Europe 600 SXXP,
    closed down 0.9%, while London’s FTSE 100 UKX,
    gained 0.1%.

  • In Asia, the Shanghai Composite SHCOMP,
    fell 1.4%, while the Hang Seng HSI index,
    rose 0.3% in Hong Kong and Japan Nikkei 225 NIK,
    gained 0.4%.

—Steve Goldstein contributed to this report.

Julio V. Miller