September 29, 2022

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Dow tumbles 800 points, Nasdaq books lowest close since 2020 ahead of megacap tech earnings

U.S. stock benchmarks ended sharply lower Tuesday, with the Nasdaq Composite booking its lowest close since 2020, as investors sifted through a raft of company results and awaited earnings reports that came after the bell from tech giants, including Microsoft Corp. and Google parent Alphabet Inc.

How did stock indexes perform?
  • The Dow Jones Industrial Average
    DJIA
    dropped 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 finish at 4,175.20.

  • The Nasdaq Composite
    COMP
    shed 514.11 points, or 4%, to end at 12,490.74, booking its largest daily percentage drop since Sept. 8, 2020 and its lowest close since Dec. 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%.

Also read: U.S. stocks ended a Manic Monday in the green — but intraday bounces like this aren’t bullish

What drove markets?

Stocks sank 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 beginning of the year, said Aoifinn Devitt, chief investment officer at Moneta, in a phone interview Tuesday. “There is this fear of slowing growth.” 

The CBOE Volatility Index
VIX
jumped to around 33 on Tuesday, according to FactSet data. That compares with a 200-day moving average of around 21.

Consumer discretionary
XX:SP500,
information technology
XX:SP500
and communication services
XX:SP500
were the hardest hit sectors of the S&P 500 on Tuesday, according to FactSet data. Tech and communications services had posted the strongest performance for the S&P 500 in Monday’s stock market rally.

“Now we have this giveback today,” said Devitt. “Markets are trying to figure out 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.

Stocks fell as investors waded further into the busiest week of the U.S. company-earnings reporting season, digesting results from a number of corporate heavyweights released before the opening bell. They were also looking ahead to results from megacap tech companies Microsoft Corp.
MSFT
and Google parent Alphabet Inc.
GOOG,
which reported after the closing bell.

Tech giants are “big movers in the market,” said Paul Nolte, a portfolio manager at Kingsview Investment Management, by phone Tuesday. Both the S&P 500 and Nasdaq are “dramatically impacted by tech.” 

Jitters around tech were amplified by the performance of formerly high-flying Netflix
NFLX
shares, which have dropped more than 40% since announcing last week that it had lost 200,000 subscribers in the first quarter.

While around 80% of companies so far reporting earnings for the quarter have beaten profit expectations, including General Electric Co., United Parcel Service Inc. and Pepsico Inc., disappointing earnings forecasts are weighing on shares.

Read: First major Wall Street bank to call for a recession now sees clear outside risk it could be `more severe’

In U.S. economic data, orders at U.S. factories for durable goods rose 0.8% in March and business investment rebounded after the first decline in a year, signaling the economy is still growing at a steady pace. The rise in durable-goods orders matched the consensus expectation produced by a survey of economists by The Wall Street Journal.

 A survey of consumer confidence dipped in April to 107.3 from 107.6, but Americans signaled they are optimistic enough about the economy to keep buying big-ticket items such as news cars and appliances.

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

The Federal Reserve’s policy meeting next week is meanwhile weighing on investors, who are anticipating the central bank may announce a large rate hike, potentially of 50 basis points, in an effort to tame hot inflation, according to Nolte.

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

Which companies were in focus?
  • Twitter Inc.
    TWTR
    shares fell 3.9% Tuesday to $49.68 after its board agreed Monday to accept Tesla chief Elon Musk’s $54.20 a share bid for the social-media platform.

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

  • Shares of PepsiCo Inc.
    PEP
    dipped 0.25% after delivering earnings and revenue that exceeded Wall Street forecasts.

  • United Parcel Service Inc.
    UPS
    shares fell 3.5% after the package-delivery giant reported first-quarter profit and revenue that beat expectations.

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

  • Shares of JetBlue Airways Corp.
    JBLU
    plummeted 11.4% after the air carrier reported a narrower-than-expected loss and revenue that more than doubled to match forecasts, but said it planned to reduce capacity growth further to help restore operational reliability. United Airlines Holdings Inc.
    UAL
    said Tuesday it is launching the biggest transatlantic expansion in its history with 30 new or resumed flights coming from mid-April through early June. United Airline shares fell 4.8%.

How did other assets fare?
  • The yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    fell 5.2 basis points to 2.773%. Yields and debt prices move opposite each other.

  • The ICE U.S. Dollar Index
    DXY,
    a measure of the currency against a basket of six major rivals, was up 0.6%.

  • Bitcoin
    BTCUSD
    was down 5.3% at around $38,018.

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

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

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

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

—Steve Goldstein contributed to this report.

https://www.marketwatch.com/story/u-s-stock-futures-edge-lower-as-megacap-tech-earnings-await-11650967239