US stocks fell sharply on Tuesday as investors returned to a holiday shortening week filled with quarterly earnings reports from companies across all three major indices.
The Dow Jones Industrial Average fell more than 600 points and the big tech Nasdaq fell 2.4% in daily trading as Wall Street continued to assess the possibility of a rate hike sooner than expected. The S&P 500 was also lower, dropping 1.9%. Meanwhile, the yield on 10-year Treasuries rose to its highest level in two years – up to 1.84%.
The sell-off is “a continuation of what we’ve seen so far this year — it’s all about interest rates,” David Lefkowitz, head of equities for the Americas at UBS Global Wealth Management, told Yahoo Finance Live. A high 10-year yield “has significant implications for the internals of the market.”
Wall Street closed Monday in observance of Martin Luther King Jr. Day, but resumed trading Tuesday amid a flurry of corporate results revealed ahead of the session: Goldman Sachs (GS), PNC and Bank of New York Mellon (BK) released reports Earnings for the last three months of 2021 before the market opens.
Goldman Sachs (GS) reported fourth-quarter earnings that fell below analysts’ expectations — reflecting a dip in profits for the final three months of the year due to weakness in its trading arm, adding to the lackluster lineup of recent banks’ results. Shares of Goldman Sachs fell 8.3% in daily trading to $349.30 a piece.
“Investment banking results based on increased advisory have been really clear at Goldman Sachs, but I think trading returns will be a little softer as the volatility caused by the pandemic is starting to subside,” said John Curran, chief analyst at the bank and portfolio manager at Yahoo. Finance Live. That, along with the expense forecast, is what the market might react to today.”
As earnings season picks up, investors will put their focus on company earnings and other corporate metrics, shifting – at least temporarily – from concerns about the Federal Reserve’s tightening of monetary policy and the economic uncertainty that has roiled stocks in recent weeks.
“I think a lot of rationality tends to come back in earnings season,” OANDA market analyst Craig Erlam told Yahoo Finance Live. “This is when people will start to have a better understanding, or at least maybe start looking at the markets through a more rational lens, and we can start to see a little bit of a return to normalcy for the markets.”
Concerns about sooner-than-expected interest rate increases have weighed on stock markets in 2022 so far. The S&P 500 is down 2.79% year-to-date, while the Dow is down 1.84%. The Nasdaq is down a whopping 5.93% so far this year, with more than a third of companies in the index at least 50% from 52-week highs, according to Bloomberg data.
“It’s really exciting to see the markets absorb this transition from green ‘go’ light to ‘cautious’ yellow,” Troy Jaysky, chief market strategist at FS Investments, told Yahoo Finance Live. since the bottom of the epidemic.”
However, the outlook for 2022 remains positive among strategists who predict that although the year is unlikely to fit in with the huge returns of 2021, the stock is in good shape for solid returns going forward.
“From an economic perspective, 2022 will look like a moderate version of last year, but investors should be aware that the prevailing tailwinds are starting to subside,” Charlie Ripley, chief investment analyst at Allianz Investment Management, said in a note. of the pandemic will likely bleed into 2022, but the immediate threat from COVID-19 to the economy will continue to diminish.
He added, “Risk assets are likely to have positive returns in the post-COVID economy, but headwinds are picking up and performance will be more volatile than in past years.”
On the economic front, investors will also join in on new data from Washington due out on Tuesday, including new readings for the New York Federal Reserve’s Empire Manufacturing Index and the National Association of Home Builders’ Housing Market Index.
The Treasury Department is also scheduled to announce its latest edition of Treasury Net Long-Term Flows, which tracks the flow of Treasury and agency securities, corporate bonds and stocks, in and out of the United States.
2:17 p.m. ET: Meme stock drops as broader markets head lower
The sell-off in speculative assets such as MIM shares deepened on Tuesday as investors dumped riskier, money-losing investments amid a broader rout in equities driven by concerns about interest rate increases.
According to Bloomberg, meme stock favorites AMC Entertainment (AMC) and GameStop (GME) led the declines among the group. AMC shares are down 10.65% in the midday session to trade at $18.38 a piece, while GME shares are down 7.37% to $108.05 a share.
The declines also worsened for other high-risk investments: Losses, companies that went public via SPACS, or mergers with blank check companies accelerated, with the De-SPAC index plunging to another record low of 4.5%, according to Bloomberg data. Star Fund Manager Cathie Wood’s Ark Innovation ETF (ARKK) is down 4% to its lowest level since July 2020 as all components that make up the trading strategy fall. The fund’s share price was $77.40 in the afternoon session, down 3.5%.
1:45 p.m. ET: An activist investor who comes from Kohls
Shares of Kohls (KSS) rose in daily trading after activist hedge fund Macellum Advisors urged the supermarket chain to explore strategic options, and put itself up for sale among themselves, if the company does not improve its business to increase its share price.
The push comes months after the retailer reached an agreement with Macellum and other activist investors in which it agreed to add two stakeholder candidates to its board as independent directors.
Kohls jumped nearly 10% during the session. The stock was trading at around $50.03 per share in the afternoon, up 4.73%.
11:00 a.m. ET: Peloton taps McKinsey & Co for possible restructuring
Exercise equipment maker Peloton Interactive (PTON) has asked consulting firm McKinsey & Co to review its cost structure in a move that could lead to job cuts, according to a CNBC report.
The company’s shares fell 5.5% in morning trading, hitting an 18-month low as the broader markets slumped. Peloton was down 3.8% to $30.14 a share as of 10:55 a.m. ET.
The company wiped out more than 75% of market value last year in 2021 amid declining demand for bikes as consumers gradually return to pre-pandemic habits. As a result, Peloton also lowered its full-year forecast by as much as $1 billion in November, attributing the change to a faster-than-expected slowdown in its equipment purchases.
10:30 a.m. ET: Airlines shares fall amid massive market sell-off
US airline stocks fell in morning trading, posting losses for a second straight session, putting the sector on course for its biggest two-day drop in more than a month, according to Bloomberg data.
The S&P Supercomposite Airlines Industry Index (S15AIRL) lost as much as 1.9% at the open after the index closed 2% lower on Friday, according to Bloomberg. The index is now down 3.8% in two sessions, the biggest drop in two days since Dec. 14.
All nine companies in the index were in the red: United Airlines (UAL) is down 0.32% to $46.59 a share, Delta Air Lines (DAL) is down 0.30% to trade at $40.19 a piece, and Hawaiian Holdings (HA) is down 0.15 % to $20.15 per share.
In addition to being hit by the broader declines spurred by concerns about interest rates, airlines have also been hit by several other factors, including winter weather, virus disruptions, and the impending expansion of 5G, which could cause major problems for the airline industry.
10:15 a.m. ET: US homebuilder sentiment down in January
The National Association of Home Builders / Wells Fargo Housing Market Index showed that confidence among builders of single-family homes in the US declined in January after four months of consecutive increases in print.
According to the Trade Association, rising material costs and shortages have added weeks to typical single-family build periods as the US economy has struggled with rising inflation and subsidized supply chains.
The index fell one point to 83 this month. A reading above 50 indicates that more builders view conditions as good than poor.
9:45 a.m. ET: Activision Blizzard stock soared after Microsoft deal announcement
Shares of Activision Blizzard Entertainment (ATVI) jumped after Microsoft (MSFT) said it would acquire the company in a $68.7 billion deal, marking the software giant’s largest acquisition to date. Microsoft is expected to buy the video game publisher for $95 per share.
ATVI shares are up more than 30% in morning trading, to about $85 a piece. Microsoft stock was down at the open, down 1.27% to $306.27 per share.
Upon closing of the deal, Microsoft is poised to become the world’s third-largest gaming company by revenue, after Tencent (TCEHY) and Sony (SONY), according to the tech giant. The deal represents another consolidation step in the gaming industry – and a big bet for the future of the metaverse.
“This is a great extension and, by the way, smart timing on Microsoft’s part,” Bob O’Donnell, head of technology analyst research, told Yahoo Finance Live.
9:36 a.m. ET: Wall Street’s major indexes fall as interest rate concerns persist
Here are the main moves in the markets as trading reopened after the weekend:
Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): -68.15 (-1.46%) to 4594.70
dow (^ DJI): -550.15 (-1.53%) to 35361.66
Nasdaq (^ ninth): -284.99 (-1.91%) to 14,608.77
raw (CL = F.): +0.83 dollars (+0.99%) to 84.65 dollars per barrel
gold (GC = F.):- $1.10 (-0.06%) to $1,815.40 per ounce
Treasury for 10 years (^ degeneration): +0.68 basis points to produce 1.84%
7:40AM ET: Goldman Sachs profit misses analyst estimates
Goldman Sachs (GS) reported fourth-quarter earnings that fell below analyst expectations — reflecting a dip in profits for the final three months of the year due to weakness in its trading arm. However, strong deal activity helped the investment bank achieve record profits for the full year.
Goldman Sachs shares fell more than 2.5% before opening to about $381 a piece.
The company’s results showed a decrease in net profit applicable to common shareholders to $3.81 billion in the period ended December 31, from $4.36 billion in the first quarter of the previous year. Earnings per share decreased to $10.81 from $12.08 a year earlier.
The consensus analyst expected the bank to report adjusted earnings of $11.65 per share on revenue of $12.010 billion, according to Bloomberg data.
7:00 AM ET Tuesday: Contracts on the three major indices drop ahead of the opening
Here are the main moves in futures trading on Tuesday morning:
S&P 500 futures contractsES = F.): -48.75 points (-1.05%) to 4,606.00
Dow futures contractsYM = F.): -241.00 points (-0.67%) to 35555.00 points
Nasdaq futures contractsNQ = F.): – 258.00 points (-1.65%) to 15,337.75 points
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed
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