Stocks drop before foggy earnings season begins
U.S. stocks fell before the start of one of the most uncertain earnings seasons on record as the coronavirus pandemic rattles the global economy.
The S&P 500 Index pared losses after dropping as much as 2.5%, with gains in consumer discretionary, technology and communication companies offsetting declines in other major groups. Oil slipped as investors weighed whether an unprecedented deal by the world's biggest producers to cut output could stabilize the market. Treasurys and the dollar retreated.
With the coronavirus pandemic sowing chaos across the world, the investment community has been lost in a fog when it comes to corporate profits. As the earnings season kicks off this week, traders might get a sense of how bad the hit to global earnings could be as the outbreak upends the global economy.
"Companies, analysts, traders, investors and strategists to some extent are 'flying into earnings season without instruments'," John Stoltzfus, the chief investment strategist at Oppenheimer & Co., wrote to clients. "The unprecedented nature of the economic shutdown, social distancing and sheltering in place ordered by officials provides an overhang of uncertainty."
The S&P 500 is trading below the 2,800 level -- a major support line in 2019 that served as resistance the prior year. With one of foggy earnings season kicking off this week, there may be few catalysts to push stocks higher.
"We're in for a tough year," said Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Corp. in a Bloomberg Television interview. Earnings are going to be down "by about 30%," she added.
In focus this week:
- U.S. banks and financial firms begin reporting first-quarter earnings, led by JPMorgan, Citigroup, Bank of America, BlackRock, Goldman Sachs and Wells Fargo.
- Bank Indonesia rate decision and briefing Tuesday
- South Korea holds parliamentary elections and the Bank of Canada has a rate decision Wednesday
- Also Wednesday, U.S. retail sales are poised to fall in March by the most ever seen
- China releases GDP, industrial production and retail sales and jobless figures Friday
These are the main moves in markets:
Stocks
- The S&P 500 declined 1% as of 4 p.m. EDT.
- The MSCI Asia Pacific Index fell 0.3%.
- The MSCI Emerging Market Index declined 0.5%.
Currencies
- The Bloomberg Dollar Spot Index dipped 0.2%.
- The euro fell 0.2% to $1.0916.
- The Japanese yen appreciated 0.7% to 107.68 per dollar.
Bonds
- The yield on two-year Treasurys gained two basis points to 0.25%.
- The yield on 10-year Treasurys climbed four basis points to 0.76%.
- The yield on 30-year Treasurys increased five basis points to 1.39%.
Commodities
- The Bloomberg Commodity Index decreased 0.1%.
- West Texas Intermediate crude decreased 0.4% to $22.68 a barrel.
- Gold increased 0.7% to $1,765.30 an ounce.
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Wall Street selloff follows week-long tear, uprecedented oil production cut
The Washington Post · Rachel Siegel · BUSINESS, US-GLOBAL-MARKETS
U.S. markets returned from the holiday weekend and quickly flashed red, dialing back last week's solid gains as the country continues to brace for rising coronavirus cases in major hot spots and beyond.
The Dow Jones industrial average closed Monday 328 points down, or 1.39%. Industrial giant Caterpillar was the biggest drag on the Dow after UBS delivered a rare, double-downgrade that took the stock from a buy to a sell without stopping at hold.
The Standard & Poor's 500-stock index finished the day down 1%, while the Nasdaq tipped upwards 0.48%, as markets head into earnings season amid relentless bad economic news from the first quarter of the year.
All three indexes went on a tear last week as investors seized onto inklings of progress in the global coronavirus fight, including a slowing of confirmed cases domestically and around the world. Even as stocks swung wildly from sharp highs to deep lows in recent weeks, analysts said markets were broadly pivoting toward a long-term economic recovery rather than being hounded by day-to-day volatility. The S&P 500 - a trusted gauge of future performance for America's 500 largest companies - closed Thursday up 13% for the week.
Japan's Nikkei 225 closed down 2.33%. Hong Kong's Hang Seng posted gains of 1.38%, and the Shanghai composite finished 0.5% in the negative. European markets were closed for Easter Monday.
Oil prices were largely subdued after major oil-producing countries agreed to an unprecedented production cut aimed at stabilizing global markets. On Sunday, the Organization of the Petroleum Exporting Countries and its allies agreed to slash production by a historic 9.7 million barrels per day in May and June, or almost 10 percent of the global output. Though significant, the cuts alone aren't nearly enough to align oil production with demand. The reduction will begin May 1 and last through June.
The coronavirus outbreak has dealt a piercing blow to oil demand and prices, spurring broad coordination among Russia, Saudi Arabia and the United States. Negotiators, part of the group known as OPEC+, initially sought to cut production by 10 million barrels per day, but Mexico objected to the share it was asked to cut and stalled a final deal.
