Some of Wall Street’s biggest banks kick off a week filled with company results.
Ed Jones/AFP via Getty Images
The stock market dropped Monday. Scary news from Apple was enough to wipe out all of the earlier gains for the day.
The Dow Jones Industrial Average fell 216 points, or 0.7%, while the S&P 500 declined 0.8%, and the Nasdaq Composite fell 0.8%. The indexes were all solidly in the green before the news from Apple.
Apple (ticker: AAPL) plans on slowing down hiring and spending growth next year as economic demand wanes. Apple stock dropped 2%.
This comes after stocks popped on Friday, with all three major indexes gaining more than 1% as investors dialed back their expectations for a full-point rate increase by the Federal Reserve. The market has enjoyed a larger rally, as the S&P 500, at 3830, is still about 5% above its intraday low for the year of 3636 hit in mid June.
“Wall Street is starting to find its footing as investor Fed tightening fears eased,” wrote Edward Moya, senior market analyst at Oanda.
That’s given investors the all clear to focus on corporate profits instead. And they will have to focus given that 244 S&P 500 companies will report earnings over the next two weeks.
Already, companies are beating expectations. With almost 10% of the S&P 500’s market capitalization having reported earnings, earnings have come in 3.7% above estimates. Still, one issue remains. While companies are beating expectations for the past quarter, the road ahead might be more difficult. With interest rates rising and calls for a recession growing louder, it seems likely that earnings estimates must decline. Profit expectations for the S&P 500 for 2022 have risen over the course of the year, but are now down 0.3% in the past month, according to FactSet.
“Second quarter reporting season should kick off a much-anticipated round of negative earnings revision,” wrote Dennis DeBusschere, founder of 22V Research.
Actual earnings results Monday morning were strong. Goldman Sachs (GS), for instance, has gained 2.5% after reporting better-than-expected earnings, while Bank of America (BAC) was flat even after missing estimates.
Whether earnings can be good enough to keep the rally going remains to be seen.
Indeed, the stock market failed to pass a key level. Sellers came in to knock the index lower at about 3900, a level that the index had failed to surpass twice during the rally off of the June low. The decline Monday did come as the Apple news hit the wires, but the announcement is consistent with the larger fear the companies will have to prepare for lower-than-expected earnings. That’s much of why there is weak demand for stocks at lower price levels.
Outside of stocks, Bitcoin USD and other tokens were rising as investors’ appetite for risky assets returned. Bitcoin rallied 4% to just over $21,000.
Here are some stocks on the move Monday:
Stocks sensitive to digital assets rallied, with shares in crypto exchange Coinbase Global (COIN) rising9.1%. MicroStrategy
(MSTR), a software group with significant Bitcoin holdings on its books, gained 5.4%, while digital payments groups Block
(SQ) and PayPal
(PYPL) rose 0.4% and 0.3%, respectively. Bitcoin miners Marathon Digital (MARA) and Riot Blockchain (RIOT) were 21% and 12% higher.
WD-40 (WDFC) stock gained 7.2% after getting upgraded to Buy from Neutral at D.A. Davidson & Co.
JPMorgan Chase & Co. (JPM) stock fell 1% after getting upgraded to Hold from Sell at Berenberg.
Write to Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com
