U.S. Stocks Fall After Gloomy Earnings Forecasts: Markets Wrap

(Bloomberg) — U.S. equities declined at the start of a busy week for corporate earnings as investors are closely watching results for insights into the effect of inflation and consumer spending as the Federal Reserve steps up policy tightening.

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The S&P 500 slipped 1.9% and the Nasdaq 100 shed 2.9%, erasing Monday’s choppy gains. General Electric Co. slid after a disappointing profit forecast on supply chain woes. Twitter Inc. fell after Elon Musk sealed a deal to buy the social-media platform. Meanwhile, Treasuries, the dollar and oil prices all rose, while European gas surged on reports of a halt in flow.

The prospect of slower economic expansion alongside persistent inflation is leading to a febrile mood in markets. The panoply of risks spans the pandemic, supply-chain disruptions, Fed tightening and Russia’s grinding war in Ukraine. The search for portfolio buffers in the U.S. is evident in the highest relative cost of loss-protecting put contracts in two years.

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

U.S. corporate earnings are providing some solace for equity bulls — close to 80% of firms have beaten profit expectations including GE, United Parcel Service Inc. and Pepsico Inc. However, disappointing forecasts, including those from JetBlue Airways Corp., are weighing on shares. Results from Microsoft Corp., Google parent Alphabet Inc. and Visa Inc. are still to come.

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“This will be the busiest week of reports for the first quarter earnings season,” Art Hogan, chief market strategist at National Securities, said in a note. “This should provide investors an opportunity to shift their focus from the macro headwinds like inflation, the Fed, China…


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