Nasdaq, S&P 500 Extend Losses As Traders Reassess Fed Rate Path: Analyst Says Don't Expect Good News This Earnings Season

Zinger Key Points
  • Markets remained risk-averse on Monday as speculators ponder the Fed's policy course.
  • After NY manufacturing index surprises higher, dollar and Treasury yields rally while tech shares plunge.

The stock market is kicking off the new week with declines on all major U.S. indices, as better-than-predicted economic prints cemented expectations for a Fed rate hike in May, with investors now fearing that rate cuts may not arrive as early as previously assumed. 

Banking giants such as JP Morgan Chase & Co. JPM and Wells Fargo WFC announced better-than-expected earnings last week, but attention has shifted to the smaller banks that were at the core of the banking turbulence in March. Charles Schwab SCHW reported upbeat quarterly earnings, but sales missed expectations and deposits declined. Alphabet, Inc. GOOGL plummeted nearly 4% after it was reported that Samsung Electronics Co. Ltd. SSNLF  was considering replacing Google as the default search engine on its smartphones with Microsoft Corp's MSFT Bing.

Cues From Monday's Trading:

Major U.S. stock market indices traded in the red on Monday midday trading, except the Russell 2000 index, up 0.5%. The S&P 500 index fell 0.5%, the tech-heavy Nasdaq 100 tumbled 0.7% and the Dow Jones Industrial Average eased 0.2%.

U.S. Indices' Performance In Week Ended April 14
Index Performance (+/-)   Value
Nasdaq Composite -0.4%   12,084.65
S&P 500 Index -0.5%   4,125.76
Dow Industrials -0.2%   33,870.13

Analyst Color:

Analysts are wary of the first-quarter earnings season but they expect the market to hold up.

Gina Bolvin, president of Bolvin Wealth Management Group, said, “While we don’t think earnings season will bring much in the way of good news, expectations are low enough that we may see stocks hold up again after results just as they generally did during fourth-quarter earnings season in late January through mid-February.”

Savita Subramanian, equity analyst at Bank of America Securities, expects "big cuts" in term of guidance for the full year. BofA's 2023 EPS estimate for the S&P 500 is $200, which is 9% below consensus estimates.

Monday's Trading In Major US Equity ETFs: 

In midday trading Friday, the SPDR S&P 500 ETF Trust SPY edged 0.2% lower to $411.72, the SPDR Dow Jones Industrial Average ETF DIA eased 0.1% to $338.78 and the Invesco QQQ Trust QQQ fell 0.6% to $316.73, according to Benzinga Pro data.

Among U.S. equity sectors, the Real Estate Select Sector SPDR Fund XLRE, outperformed, up 1.3%. The largest underperformer was the Communication Services Select Sector SPDR Fund XLC, down 1.3%, followed by the Energy Select Sector SPDR Fund XLE, down 1%. 

Latest Economic Data:

The NY Empire State Manufacturing Index surprisingly jumped 35 points to 10.8 in April, markedly above market forecasts of -18, the New York Federal Reserve reported Monday.

The National Association of Home Builders reported that the housing market index for April increased from 44 in March to 45 in April, hitting fresh highs since September 2022. 

See also: How To Trade Futures

Stocks In Focus:

Moderna, Inc. MRNA tumbled 8% despite a cancer vaccine developed by Moderna and Merck & Co. Inc. MRK showed promising results in a key study, reducing the risk of recurrence or death by 44%, the drugmakers said Sunday.

Prometheus Biosciences, Inc. RXDX shares jumped over 70% after Merck & Co., Inc. MRK announced a deal to buy the former for about $10.8 billion.

State Strate Corp. STTT missed earnings and revenue expectations for the quarter, with the shares falling 11.3% on the day. The Bank of New York Mellon Corp. BK fell 8.2% ahead of the company's quarterly earnings report on Tuesday. Northern Trust Corp. NTRS fell 3.5% ahead of the company's quarterly earnings report on Tuesday. 

Charles Schwab Corp. SCHW rose 3% after reporting better-than-expected earnings in Q1, although missing revenue projections. 

M&T Bank Corp. MTB rose 7% after posting better-than-expected financial results in Q1. 

  • Alphabet, Inc. GOOGL fell 3.5% after a New York Times report said Samsung could replace Google Search with Microsoft Corp.’s MSFT Bing.
  • Pinnacle Financial Partners, Inc. PNFP and J.B. Hunt Transport Services, Inc. JBHT are among the notable companies that are due to release their quarterly results after market close on Monday.

Top Analyst Calls

  • Meta Platforms, Inc. META: New Street Research downgrades from Buy to Neutral with a $220 price target.
  • Netflix, Inc. NFLX: New Street Research maintains Neutral rating and ups price target from $320 to $333.
  • Wolfspeed, Inc. WOLF: JPMorgan downgrades from Overweight to Neutral and takes down the price target from $100 to $65.

Commodities, Bonds, Forex And Other Global Equity Markets:

Crude oil fell 1.8%, with a barrel of WTI-grade crude trading at $81. The United States Oil Fund ETF USO was 1.7% higher to $70.88 per share.  

Treasury yields spiked, with the 10-year yield surging by 8 basis points to 3.6% and the two-year yield surging 10 basis points to 4.2%. The iShares 20+ Year Treasury Bond ETF TLT was 1.3% lower on the day. 

The dollar recovered further, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.6%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was down 0.7% to 1.0912.   

European equity indices were mixed. The iShares MSCI Eurozone ETF EZU was 1.2% lower.  

Gold eased 0.8% to $1,988/oz. The SPDR Gold Trust GLD was 0.8% lower to $184.79. Silver also tumbled 1.7% to $24.94, with the iShares Silver Trust SLV trading 1.7% lower to $22.91 per share. Bitcoin fell 3.26% to $29,334.

Staff writer Piero Cingari updated this report midday Monday.  

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