Wall Street ends lower, expects uncertain earnings season

The New York Stock Exchange ended lower on Monday, seeing no short-term way out of a mix of inflation, economic slowdown and rate hikes as an uncertain earnings season looms.

The Dow Jones fell 0.52%, the tech-heavy Nasdaq index fell 2.26%, and the broader S&P 500 index fell 1.15%.

For Louis Navellier, of Navellier & Associates, Wall Street was misguided from the opening “partly because China imposed new restrictions linked to Covid”, but also because of the gloom displayed by Europe, at the edge of a major energy crisis.

For analysts at Briefing.com, investors were also influenced by the drop in bond rates, a sign of a movement of risk aversion.

The yield on 10-year US government bonds contracted to 2.98%, against 3.08% on Friday, and appears significantly below the 2-year yield (3.06%), a phenomenon called inversion of the yield curve, which is often considered to herald a recession.

“Caution is again general”, commented Angelo Kourkafas, of Edward Jones, on a wait-and-see market before several events. Operators are thus already looking towards the CPI price index, due on Wednesday, which should confirm that inflation continued to accelerate in June. It is expected at 8.8% over one year, against 8.6% in May.

Angelo Kourkafas also pointed to the first wave of corporate results, with banks featured this week, Thursday and Friday.

“The market will watch closely any forecast and anticipation on consumer activity,” according to analysts at Schwab.

In general, “the results season could be a source of appetite for risk”, dares Angelo Kourkafas nevertheless, many companies having succeeded in passing on, in the second quarter, the increase in their costs to their prices, thus preserving relatively their margins and profits.

But the general opinion is that the forecast results for the year remain too high. “As the context becomes more difficult, the estimates will have to be lowered to reflect” the new macroeconomic environment.

Monday, in a market deprived of fresh news, investors were marked, according to the analyst, by the setbacks of Twitter, which lost 11.30% to 32.65 dollars, after the renunciation of Elon Musk to redeem the platform.

As for the title Tesla, led by the versatile entrepreneur, he fared hardly better, losing 6.55% to 703.03 dollars.

“We come back to the picture that prevailed for most of the year, namely the lagging technology stocks and the defensive stocks (less sensitive to the economic situation) which are doing well”, underlined Angelo Kourkafas.

Favorite targets of investors for most of the year, Meta (-4.68%), Nvidia (-4.33%), Qualcomm (-2.77%) or AMD (-3.02%) suffered .

Conversely, Procter & Gamble (+0.70%) or Kraft Heinz (+0.63%) resisted, playing their role as defensive stocks.

The start of confinement in Macau hit the casino and hotel groups MGM Resorts International (-3.20%), Wynn Resorts (-6.46%) and Las Vegas Sands (-4.09%) hard.

In general, Chinese stocks were shunned, like the online trading platforms JD.com (-3.90%) and Pinduoduo (-10.03%).