New York (AFP) – The New York Stock Exchange was down on Monday shortly after the opening, caught up in the prospect of a sharp economic slowdown, tense by new confinements in China and cautious before the start of the earnings season which begins this week.
Around 1:55 p.m. GMT, the Dow Jones yielded 0.44%, the Nasdaq index, with a strong technological composition, dropped 2.25%, and the broader S&P 500 index lost 1.16%.
The New York indices followed the trend set earlier by Asian and then European markets.
“Back from the weekend, the mood is tense with fears linked to growth”, explained, in a note, Patrick O’Hare, of Briefing.com.
The market was worried about a new wave of confinements in China which extended to Macao on Monday, where residents are only allowed to go out for basic necessities or to be tested.
The news hit the casino and hotel groups MGM Resorts International (-2.62%), Wynn Resorts (-6.77%) and Las Vegas Sands (-8.17%), which were all desperate. in the first exchanges.
Wall Street was also following the energy dossier in Europe, which fears that the delivery of Russian gas will not resume after the maintenance work started on Monday by the company Gazprom on the two Nord Stream 1 gas pipelines.
“There’s a lot to take in at the moment,” commented Maris Ogg of Tower Bridge Advisors. “And of course the market doesn’t like uncertainty.”
“So it’s nice to see a bounce here or there,” like last week’s streak of three S&P 500 rises in four sessions, “but it doesn’t look like the long-term trend has changed,” said the analyst.
It was time for caution on Monday, as evidenced by the bond market, marked by a sharp drop in rates, a sign of investors’ taste for these assets deemed safer.
The yield on 10-year US government bonds fell below 3%, to 2.98%, from 3.08% on Friday.
The yield curve, a graph that links yields for the main bond maturities, was still inverted, with a 2-year rate above the 10-year rate, a phenomenon often interpreted as the harbinger of a recession.
The VIX index, which measures market volatility, rose significantly by 7%.
Earnings season kicks off this week on Wall Street, with PepsiCo on Tuesday, Morgan Stanley on Thursday, and Wells Fargo and BlackRock on Friday.
According to Sam Stovall of CFRA, analysts recently lowered their estimates, but still expect, on average, a 5.2% increase in quarterly profits year on year.
Nevertheless, they also see margins contracting by 4.9%, still compared to the same period of 2021.
“Investors are wondering when analysts will start lowering their estimates” for the whole of 2022, “like economists did for growth forecasts”, commented, in a note, Sam Stovall.
Maris Ogg recalled that several American companies had already taken the lead and warned operators of a change in trajectory, in particular Microsoft or Salesforce.
“We already know that companies are going to tell us that the second quarter was okay, but that they are facing a strong dollar, inflation, rising labor costs”, which should cut their second-half results, she said. “So I expect the forecast to be lowered.”
On the rating, Twitter unscrewed (-6.68% to 34.35 dollars) after the announcement of the withdrawal of Elon Musk, who indicated Friday, after the stock market, give up the acquisition of the social network. The case now seems to have to move before the courts, which should prolong the period of uncertainty around the future of the platform, already weakened.
Tesla (-4.17% to 720.77 dollars), led by Elon Musk, did little better, undermined by the general climate of risk aversion, which penalized technology and growth stocks.
© 2022 AFP