Stocks fall ahead of busy earnings week, Fed meeting

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Stocks started falling again on Monday as investors anticipated a busy week of corporate earnings, economic data and a Federal Reserve monetary policy-setting meeting after an already volatile trading streak.

The S&P 500 and Nasdaq each fell more than 2%, while the Dow Jones fell more than 1.5%. During intraday trading, the S&P 500 was down more than 10% from its January 3 closing high, putting it on track to enter a correction. And the Nasdaq Composite fell further into a correction, falling more than 16% from its own high of Nov. 19.

The prices of major cryptocurrencies followed the decline in stocks. Bitcoin fell to around $33,000 on Monday morning, falling more than 50% from its peak in early November. And Ethereum was down more than 10% to just over $2,000 on Monday morning in New York.

Expectations of tighter financial conditions from the Federal Reserve this year have been one of the main factors weighing on stock prices, particularly for highly valued stocks that had benefited from easy financial conditions and the high liquidity environment to which the Fed had contributed since 2020.

This week’s Fed meeting, with a new monetary policy statement and a press conference by Federal Reserve Chairman Jerome Powell on Wednesday, is expected to produce virtually no immediate policy changes. However, as the Fed seeks to rein in inflation that has ballooned the most in four decades during the pandemic-era recovery, this meeting will likely set the stage for the Fed to signal it is nearing the start of rate hikes. of interest and was further considering removing assets from its balance sheet of nearly $9 trillion.

And the Fed is unlikely to be deterred from moving in this more hawkish direction, even in the wake of recent market volatility, some strategists have suggested.

“Until we get another sell off of risky assets, the Fed just won’t be convinced that raising interest rates and shrinking the size of its balance sheet in 2022 will more likely lead to a recession. than a soft landing,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note Monday.

“Either outcome would dampen inflation, of course, which is why 10-year Treasury yields have stopped rising,” he added. “But only a soft landing would allow public companies to continue posting strong earnings. The risk of a hard landing is why US large caps are under so much stress.”

A number of large-cap companies are also expected to release results throughout this week, providing another catalyst for the markets. The full list of results on deck includes Apple (AAPL), Microsoft (MSFT), 3M (MMM), McDonald’s (MCD), and Boeing (BA), among many others.

At the start of the week, only about 13% of S&P 500 companies had released quarterly results, according to Goldman Sachs. And so far, one trend that has started to emerge has been relatively weak commentary on the outlook for this year.

“Investors are very interested in forward-looking guidance from management, and recent news on this is concerning,” David Kostin, Goldman Sachs’ chief U.S. equity strategist, wrote in a note. “Bank executives have been focused on higher operating costs in the coming year.”

“Following the release of Q4 results, only six S&P 500 companies provided formal short-term guidance for Q1 2022,” he added. “Unfortunately, five of the six companies fell below consensus for the next quarter, including three of the stocks that actually beat expectations in Q4.”

10:47 am ET: US private sector services, manufacturing growth slows amid Omicron surge

Growth in the private services and manufacturing sectors slowed sharply in early January as the Omicron variant exacerbated existing supply chain and labor shortage issues.

IHS Markit’s preliminary Services Purchasing Managers’ Index (PMI) in January slipped to 50.9 from 57.6 in December. This is the lowest level in about 18 months. Readings above the neutral level of 50.0 indicate expansion in a sector. Meanwhile, the institution’s manufacturing PMI also fell in January to a 15-month low, hitting 55.0 from 57.7 in December.

“Spiking virus cases brought the U.S. economy to a virtual standstill earlier this year, with businesses disrupted by worsening supply chain delays and staffing shortages, with new restrictions to control the spread of Omicron adding to corporate headwinds,” Chris Williamson, chief economist at IHS Markit, wrote in a note. “However, production has been much more affected by Omicron than demand, with robust growth in new business entries suggesting that growth will resume once restrictions ease.”

9:30 a.m. ET: Stocks open lower

Here is where the markets were trading Monday morning:

  • S&P 500 (^GSPC): -75.94 (-1.73%) to 4,322.00

  • Dow (^ DJI): -518.59 (-1.51%) to 33,746.78

  • Nasdaq (^IXIC): -290.87 (-2.11%) to 13,497.58

  • Raw (CL=F): -$1.65 (-1.94%) at $83.49 per barrel

  • Gold (CG=F): +$7.80 (+0.43%) at $1,839.60 per ounce

  • 10-year cash flow (^TNX): -3 bps for a yield of 1.717%

7:41 a.m. ET Monday: Stock futures fall

Here is where the markets were trading Monday morning:

  • S&P 500 Futures Contracts (ES=F): -12.5 points (-0.28%), at 4,377.50

  • Dow futures (JM=F): -65 points (-0.19%), to 34,092.00

  • Nasdaq futures contracts (NQ=F): -74.75 points (-0.52%) to 14,351.75

  • Raw (CL=F): -0.00$ (-0.00%) to 85.14$ per barrel

  • Gold (CG=F): +$8.30 (+0.45%) at $1,840.10 per ounce

  • 10-year cash flow (^TNX): -1 bp for a yield of 1.737%

NEW YORK, NEW YORK – JANUARY 20: Traders work on the floor of the New York Stock Exchange (NYSE) on January 20, 2022 in New York City. The Dow Jones Industrial Average rose more than 200 points in morning trade after days of declines. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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