Dow drops 700 points, Nasdaq tumbles on megacap tech earnings

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What drives the markets?

Stocks tumbled on Tuesday afternoon as all three major benchmarks fell 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 nearly 18% to nearly 32 on Tuesday afternoon, according to FactSet data. This compares to a 200-day moving average of around 21.

Consumer Discretionary XX: SP500,
computer XX:SP500
and communication services XX:SP500
were the hardest hit sectors in the S&P 500 early Tuesday afternoon, according to FactSet data. Technology and communication services had posted the best performance of 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 is trading not far from its closing low this year of 4,170.70 on March 8, according to Dow Jones Market Data. The Nasdaq was trading below its 2022 closing low of 12,581.22, reached on March 14, according to FactSet data, when last checked.

US stocks fell as investors advanced in the busiest week of the US corporate earnings reporting season, analyzing the results of a number of heavyweights released before the opening bell. They are also eagerly awaiting results from megacap tech company Microsoft Corp. MSFT
and Alphabet Inc., parent company of Google. GOOG
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”.

Formerly top flight Netflix NFLX
the shares have fallen more than 40% since announcing last week that it had lost 200,000 subscribers in the first quarter.

While around 80% of companies that have so far reported earnings for the quarter have exceeded 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 conducted by 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 are targeted?

• Twitter Inc. TWTR
  Shares fell 3.3% on Tuesday to around $50 after its board on Monday agreed to accept Tesla chief Elon Musk’s $54.20 per share offer on the platform. of social media.

• 3M Co. MMM
  Shares fell 2.9% after the maker of post-it notes and industrial equipment posted better-than-expected first-quarter earnings.

• PepsiCo Inc. Stocks MOMENTUM
  rose 0.1% after posting earnings and revenue that beat Wall Street forecasts.

• United Parcel Service Inc.UPS
  Shares fell 2.7% after the parcel delivery giant reported first-quarter earnings and revenue that beat expectations.

• General Electricity Company. GE
  Shares plunged 10.8% 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 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 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 4.4%.

How are the other assets doing?

• The yield on the 10-year Treasury note BX: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%.

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

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

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

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

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

—Steve Goldstein contributed to this report.