U.S. stocks fell slightly on Monday morning after the Nasdaq Composite Index posted its worst month since 2008, pressured by rising rates, rampant inflation and underwhelming earnings from some of the largest technology companies.
The Dow Jones Industrial Average dropped 147 points, or 0.5%. The S&P 500 fell 0.7% and the Nasdaq Composite fell 0.8%.
The Dow and S&P 500 are coming off their worst month since March 2020, when the pandemic took hold. The Dow finished April 4.9% lower, while the S&P tanked 8.8%. The Nasdaq close down 13.26% for its worst month since 2008.
“As we turn the calendar to May, we may see a short-term oversold bounce, however, we still have several reasons for concern. We believe our longer-term equity indicators are not yet oversold enough to have a high conviction ‘Buy’ call. We also believe managers have started to re-price stocks using recession like multiples. If that is the case, we are still over-valued,” MKM Partners chief market technician JC O’Hara said in a note clients.
Tech was a particular weak point in April, and some of the biggest names were struggling again on Monday. Shares of Amazon fell 2.7%, while Tesla lost 1.5%. Apple also fell more than 1%.
“Disappointing guidance from technology giants Amazon and Apple have exacerbated concern that a decidedly more hawkish Fed, coupled with still intractable supply chain issues, and rising energy prices may make the hope of a ‘soft landing’ from the Fed more elusive,” said Quincy Krosby, chief equity strategist for LPL Financial.
Payments stocks Visa and American Express fell 2.1% and 1.5%, respectively, weighing on the Dow.
Investors are looking ahead to Wednesday, when the Federal Open Market Committee will issue a statement on monetary policy. The decision will be released at 2 p.m. ET, with Federal Reserve Chairman Jerome Powell holding a press conference at 2:30 p.m.
“With inflation so high and earnings growth slowing rapidly, stocks no longer provide the inflation hedge many investors are counting on. Real earnings yield tends to lead real stock returns on a y/y basis by about 6 months. It suggests we have meaningful downside at the index level as investors figure this out,” Morgan Stanley equity strategist Michael Wilson said in a note to clients.
Another key economic indicator will come Friday when April’s jobs report is released.
Earnings season is now more than halfway finished, but a number of companies are set to post results in the coming week, including a host of consumer-focused restaurant and travel companies.
Expedia, MGM Resorts, Pfizer, Airbnb, Starbucks, Lyft, Marriott, Yum Brands, Uber eBay and TripAdvisor are just some of the names on deck.
Of the more than 280 S&P 500 companies that have reported earnings so far, 80% have beat earnings estimates with 73% topping revenue expectations, according to data from FactSet.
On Friday, the Dow dropped 939 points during the session, bringing its loss last week to roughly 2.5%. It was the 30-stock benchmark’s fifth-straight negative week.
The S&P 500 declined 3.63% on Friday, its worst day since June 2020, and posted its fourth-straight negative week for the first time since September 2020. The Nasdaq also posted a fourth-straight week of losses, after falling 4.2%. Both indexes registered their lowest closing levels of the year.