Nasdaq underperforms on worries about tech earnings ahead
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[April 25, 2023] By
Sinéad Carew, Sruthi Shankar and Ankika Biswas
(Reuters) - The Nasdaq closed lower on Monday, underperforming the S&P
500 and the Dow, with pressure from high-profile megacaps as investors
awaited results from companies including Microsoft while Tesla shares
fell on concerns about its spending plans.
Tesla Inc finished down 1.5% after the automaker raised its 2023 capital
expenditure forecast to ramp up output, making it the second biggest
drag on the benchmark S&P 500 behind Microsoft Corp.
Shares in Microsoft, up more than 17% so far this year, were under
pressure Monday as investors appeared anxious about its results, due out
on Tuesday. Another heavyweight laggard was Amazon.com Inc, which is on
deck to report this week along with Alphabet Inc, and Meta Platforms
Inc.
A rally in these stocks has supported Wall Street this year, so
investors are worried about whether the gains can continue given the
gloomy economic outlook.
"People are a little tentative that the outperformance may not continue
in earnings season, which thus far has been quite a bit better than
expected. Granted the bar was low," said Randy Frederick, managing
director, trading and derivatives at Charles Schwab in Austin, Texas.
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Frederick also pointed to anxiety about upcoming economic data such as
first-quarter growth and inflation readings.
The Dow Jones Industrial Average rose 66.44 points, or 0.2%, to 33,875.4
while the S&P 500 gained 3.52 points, or 0.09%, at 4,137.04. The Nasdaq
Composite dropped 35.25 points, or 0.29%, to 12,037.20.
Among the S&P 500's 11 major sectors, energy was the strongest, rising
1.5%, while technology was the weakest, down 0.4%.
Michael James, managing director of equity trading at Wedbush Securities
in Los Angeles, said the Philadelphia semiconductor index, which closed
down 0.5%, was likely underperforming due to increasing global tensions
with China.
U.S. stocks have largely held steady through the start of the earnings
season on stronger-than-expected results from big banks, allaying
concerns about a contagion from the regional banking crisis in March.
Of the 90 S&P 500 companies that have reported first-quarter results so
far, nearly 77% have topped analysts' estimates compared with the
long-term average beat rate of 66%, as per Refinitiv IBES data.
Early readings of first-quarter U.S. GDP, personal consumer expenditure
index (PCE) for March, and April consumer confidence are among the data
scheduled for release this week.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., April 19, 2023.
REUTERS/Brendan McDermid
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Mixed data last week cemented bets of a 25-basis-point rate hike by
the Federal Reserve in May, with money market traders pricing in a
92% chance of such a move, according to CME Group's Fedwatch tool.
Fed policymakers said in the past week that the central bank has
more work to do to bring down inflation.
U.S. Treasury yields eased following recent signs of slowing
inflation and economic activity, though investors appeared
increasingly concerned about a government spending stand-off and the
potential for the United States to hit its debt ceiling sooner than
expected. [US/]
U.S. House of Representatives Speaker Kevin McCarthy said the House
would vote on his spending and debt bill this week.
Amazon fell 0.7% while Meta pared earlier losses to close off just
0.04%. Google's parent Alphabet managed a 0.5% gain. AT&T Inc, which
reported disappointing results on Thursday, deepened last week's
losses with a 3.8% drop on Monday.
Also dragging on the S&P 500 was air conditioner maker Carrier
Global Corp, which closed down 7.3%, after reports, citing
unidentified sources, said it was in advanced talks to acquire
German industrial manufacturer Viessmann for more than $12 billion
including debt.
In the penny-stock department, shares in once-popular home goods
retailer Bed Bath & Beyond tumbled 35.7% to 19 cents after it
declared bankruptcy on Sunday. Retail rivals including Target Corp
and Walmart Inc gained 1.1% and 0.7% respectively on Monday.
After closing up 12.2%, First Republic Bank shares lost ground in
after-the-bell trading following the closely watched regional bank's
quarterly report, which showed its deposits fell 41% in the first
quarter.
The stock was last down almost 87% year-to-date as the U.S. banking
crisis sent investors to the exits.
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Advancing issues outnumbered decliners on the NYSE by a 1.32-to-1
ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.
The S&P 500 posted 21 new 52-week highs and two new lows; the Nasdaq
Composite recorded 64 new highs and 201 new lows.
On U.S. exchanges 9.54 billion shares changed hands compared with
the 10.30 billion average for the last 20 sessions.
(Reporting by Sinéad Carew in New York, Sruthi Shankar and Ankika
Biswas in Bengaluru; Editing by Vinay Dwivedi and Richard Chang)
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