Earnings season kicks off this week, with JPMorgan, Wells Fargo, BlackRock set to report Friday
The S&P 500 closed 67.32 points, or 1.4%, down at 4659.03. The Dow Jones Industrial Average fell 176.70 points, or 0.5%, to end at 36113.62. The tech-heavy Nasdaq Composite fell 381.58 points, or 2.5%, to 14806.81.
The biggest US stocks helped drag the market down, with Apple shares falling $3.34, or 1.9%, to $172.19, and Microsoft shares falling $13.47, or 4.2%, to $304.80.
The technology sector fell 2.7%, making it the worst-performing group in the S&P 500. The decline pushed the tech segment’s year-over-year loss to 5.6%.
The yield on the benchmark 10-year US Treasury note fell to 1.708% on Thursday from 1.724% on Wednesday. This is well above the 1.496% at which it ended 2021. Bond yields rise as prices fall.
When yields on longer-term bonds are higher, “you revalue those growth stocks,” said Tom Hanlin, national investment strategist at US Bank Wealth Management. “If you raise that interest rate, it puts pressure on your present value of those companies.”
Trading has been volatile in recent days as investors look for the way forward for stocks. The S&P 500, which rose 27% last year, is down 2.2% so far in 2022.
Investors are closely watching any developments that could affect the Federal Reserve’s calculations about tightening monetary policy to combat inflation. Central bank officials have indicated that interest rates may rise as soon as March. The Fed’s James Bullard said on Wednesday that four increases are likely in 2022.
Federal Reserve Governor Lyle Brainard told Congress on Thursday that efforts to reduce inflation are the central bank’s “most important task.” Ms. Brainard is designated by the White House to serve as the No. 2 official for the Fed.
“Our monetary policy is focused on bringing inflation back to 2%, while maintaining a recovery that is all-encompassing,” Ms. Brainard said.
“The main story is the market’s outlook on the central bank’s next steps. The market is balancing two things: less support from monetary policy, but overall the underlying economy is good, and we think the earnings figures that will just start to emerge.” “They will be strong enough,” said Luke Phillips, head of investment at SYZ Pvt. Banking.
Investors scrutinized data Thursday showing that filings for jobless claims reached a seasonally adjusted 230,000 last week, higher than economists expected. A tight US labor market has kept applications near pre-pandemic lows for the past two months.
Other data showed signs of a possible easing of inflationary pressure in the US supply chain. The Labor Department said its producer-price index rose 0.2% in December from the previous month, the slowest pace since November 2020.
“It fits into a larger narrative that inflation is likely to peak this quarter,” said Jack Ablin, founding partner and chief investment officer at Crescent Capital.
Earnings season kicks off this week, with major financial firms including BlackRock,
JPMorgan and Wells Fargo are set to report Friday. Jeffrey Meyers, an advisor at Markets Securities, said investors are on edge after Jefferies Financial Group posted revenue and earnings that missed analysts’ estimates on Wednesday.
According to FactSet, analysts expect the profits of companies in the S&P 500 to rise 22% over the fourth quarter from a year ago.
Among individual stocks, shares of Delta Air Lines rose 86 cents, or 2.1%, to $41.47, despite the company’s quarterly loss, with the airline’s chief executive saying he expects it to recover quickly from the impact of the Omicron version. Shares of home builder KB Home climbed $7.00, or 17%, to $49.38 after earnings above analysts’ expectations.
Overseas, the pan-continental stock Europe 600 fell less than 0.1%.
In Asia, most major benchmarks fell. The Shanghai Composite Index lost 1.2% on concerns about China’s latest COVID-19 outbreak after higher infections were reported in the port city of Tianjin. Japan’s Nikkei 225 closed down 1%.
Genting Hong Kong,
One cruise-ship operator, fell 56%. The stock resumed trading on Thursday after the German subsidiary filed for insolvency, triggering a default.