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Rising Covid-19 cases in China have spurred the possibility of more lockdowns in the country. That could disable U.S. companies from accessing supplies for goods and services, bringing costs higher and forcing them to raise selling prices. Inflation is already a threat to consumer spending.

Markets are showing fear this week. Not only did the indexes fall, but about 90% of S&P 500 stocks were down. And money rushed into safe assets, sending the price of the 10-year Treasury up and its yield down to % from 2.9% Friday.

Usually, that would enable tech stocks to outperform—or decline less—than the broader market. Lower bond yields boost the value of future profits and many tech companies are valued on the basis that they’ll churn out a chunk of their profits many years in the future.

But for the moment, market participants are just selling the most volatile assets—tech shares included—and buying the safest ones like government bonds. “It’s a very nervous market,” said Tyler Richey, co-editor of Sevens Report Research. “You’re seeing people sell out of anything that is high beta [volatility] and into anything that’s safe.” 

That sent the Nasdaq near a level it has found buyers at earlier in the year. At just under 12,500, the index is revisiting its low for the year, which it hit in mid March, before staging a multi-week rally, noted Frank Cappelleri, chief market technician and Instinet.

Maybe the next test for the Nasdaq will be tech earnings.

That’s the big event Tuesday, which could change the course of the market. Microsoft (ticker: MSFT) and Google parent Alphabet (GOOGL) are scheduled to report their numbers after the closing bell.

Analysts were expecting Microsoft to post an adjusted profit of $2.19 a share on sales of $49 billion. Google was expected to turn a GAAP profit of $25.74 a share, on sales of $68 billion. Both companies are expected to see sales growth year-over-year, while Google is expected to see its earnings decline a bit. 

Investors hope to see both stocks pop after earnings, as they’ve been hit hard already. Microsoft and Google are down 15% and 17%, respectively in 2022, hurt by rising bond yields. With the stocks much lower now, they could rise even after a fairly unimpressive earnings result. 

“Mega-cap NASDAQ names are oversold,” wrote Dennis DeBusschere, founder of 22V Research, adding that strong earnings reports could take these stocks higher. 

Either way, these stocks could move the indexes Wednesday morning after their Tuesday afternoon earnings. Their combined market value of $3.86 trillion is just over 10% of the S&P 500’s total market capitalization, big enough to drive the market higher or lower. 

Earnings season has been going better than expected. The aggregate earnings per share result on the S&P 500 has beaten the expectation by just over 7%, according to Credit Suisse data. That’s helped some stocks, but the S&P 500 has still dropped since earnings season truly began in mid-April. And the average stock price movement for the trading day after an S&P 500 company reports earnings has been flat, according to Wells Fargo data.

The reason: even though earnings have been higher than expected, that may not be the best representation of what to expect going forward. The Federal Reserve is lifting interest rates to stave off high inflation and other threats to global economic growth, like the Russia-Ukraine war and elevated commodity prices, remain. 

Elsewhere, durable goods orders rose 0.8% month-over-month in March, below the forecast of 1%, but well above last month’s result of a 1.7% decline. 

Overseas, the pan-European

Stoxx 600
fell 0.9%. The

Shanghai Composite
fell 1.4%, underperforming other bourses in Asia, as the severity of Covid-19 lockdowns in China continued to pressure investor sentiment.

Here are five stocks on the move Tuesday:

PepsiCo

(PEP) stock initially rose, then fell 0.3% after the company reported a profit of 1.29 a share, beating estimates of $1.23 a share, on sales of $16.2 billion, above expectations for $15.56 billion. 

3M

(MMM) stock fell 3% after the company reported a profit of $2.65 a share, beating estimates of $2.32 a share, on sales of $8.8 billion, above expectations for $8.7 billion. 

General Electric

(GE) stock fell 10% after the company reported a profit of 24 cents a share, beating estimates of 8 cents a share, on sales of $17 billion, above expectations for $16.9 billion. 

D.R. Horton

(DHI) stock was initially up, before it fell 2.7% after the company reported a profit of $4.03 a share, beating estimates of $3.38 a share, on sales of $8 billion, above expectations for $7.49 billion. 

Redfin

(RDFN) stock fell 6.7% after getting downgraded to Underweight from Overweight at Piper Sandler. 

Write to Jack Denton at [email protected] and Jacob Sonenshine at [email protected]