4:14pm: Nasdaq snaps five-day winning streak
The Dow closed Monday down 164 points, 0.5%, at 31,174, the Nasdaq Composite lost 263 points, 2.3%, to 11,373 and the S&P 500 slid 45 points, 1.2%, to 3,984.
Twitter shares plunged more than 11% to $32.65 after Tesla Inc CEO Elon Musk moved to terminate the $44 deal to buy the social media giant.
Investors, meanwhile, are waiting on earnings later this week from PepsiCo Inc, Delta Air Lines Inc, JPMorgan Chase & Co, Morgan Stanley, Wells Fargo & Company and Citigroup Inc.
12.05pm: Tech stocks plummet
US stocks had continued to fall at noon with the tech-laded Nasdaq Composite leading the way, down 233 points or 2% at 11,403 points.
The Dow Jones Industrial Average had shed 140 points or 0.5% at 31,198 points and the S&P 500 was down 43 points or 1% at 3,857 points.
Twitter Inc’s stock also continued to drop, down 9% at noon, after reports Tesla Inc CEO Elon Musk has backed out of his $44 million deal to buy the social media company. The company’s stock was trading at about $33.50 per share, far below Musk’s purchase offer of $54.20 per share.
AvaTrade chief market analyst Naeem Aslam said investors were hoping US consumer inflation data being released later this week would confirm that inflation had reached its peak level.
“Yes, it would take a long time for inflation to return to its average level or for market players to get used to a new average level, but inflation reaching its highest level would provide comfort for traders,” he said.
He noted another critical factor driving price action this week would be the beginning of earnings season.
“Last month, we saw a lot of volatility creeping into the market, and that was because of warnings triggered by companies like Walmart,” he said. “Their warnings made traders nervous that consumers aren’t spending, and higher inflation number has eroded their disposal income.”
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9.35am: Investors eye key earnings
US stocks opened lower on Monday with choppy trading expected to continue this week as earnings season kicks off.
Just after the open, the Dow Jones Industrial Average had shed 162 points at 31,176 points.
The S&P 500 had dipped 29 points at 3,870 points and the Nasdaq Composite had lost 126 points at 11,509 points.
Twitter Inc was down about 7% following the news that Tesla CEO Elon Musk was pulling the pin on his $44 billion bid to buy the social media company.
Uber Technologies Inc had also dipped about 4% at the open after the BBC reported that leaked documents showed the ride-sharing company had secretly lobbied ministers in the UK to influence London’s transport policy.
6:30am: More volatility predicted
US stocks were expected to open lower on Monday as the earnings season unfolds, bringing into sharp focus the outlook for corporate America amid rising interest rates and high inflation.
Trading is expected to remain choppy as investors consider the likelihood of a recession in the world’s biggest economy although there could be bright spots on the earnings front to bring out bargain hunters.
Futures for the Dow Jones Industrial Average were trading 0.4% lower pre-market, while those for the broader S&P 500 index were down 0.6% and futures for the tech-laden Nasdaq-100 lost 0.7%.
The earnings season kicks off this week, giving a concrete insight on how well US companies are dealing with rising inflation and a stronger US dollar, said Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank.
“The S&P profit estimates have been pushing higher this year, despite a major dive in stock prices. Either the analysts are well behind the curve, and the earnings will come as confirmation that inflation, and the strong US dollar are having an ugly impact on profits. Or they are right, the US company profits are resilient to economic shocks, as the jobs market is,” she noted.
Pepsi is due to announce its earnings on Tuesday, Delta Air on Wednesday, JP Morgan and Morgan Stanley on Thursday, while Wells Fargo, Citigroup, and PNC Financial will report on Friday.
In pre-market deals, Twitter shares were down about 8% after Elon Musk pulled out from his $44-billion bid for the social media company.
To some extent, investors are still digesting news from Friday that the US labor market remains resilient.
“There is no doubt that market players have been immensely worried about recession and stagflation, but the US jobs numbers told us that this recession is not like other recessions as the job market is strong,” said Naeem Aslam chief market analyst at avatrade.com.
The data helped ease concerns that consumer spending may falter, lifting stock prices on Friday.
Up ahead on Wednesday, US inflation data will be closely watched.
The data carries the risk of killing off any post-jobs data joy, noted Ozkardeskaya.
The big question is whether inflation has peaked. Expectations point to an 8.8% rise in June following an 8.6% increased in the previous month.
“If that’s the case, or if we see a bigger number, the Fed hawks will be out for hunt again. We will perhaps see a further rise in US yields, and that could force investors to give back a part of last week’s gains,” Ozkardeskaya added.
In energy markets, WTI crude oil futures were down 2.2% at $102.50 a barrel, while Brent crude futures were 1.8% lower at $105.09.
Contact the author at jon.hopkins@proactiveinvestors.com