As of 4:00 p.m., the Dow Jones was down 0.44%, the Nasdaq was down 2.25% and the broader S&P 500 index was down 1.16%.
The New York Stock Exchange was down Monday shortly after opening, caught up on prospects of a sharp economic slowdown, strained by fresh restrictions in China and cautious ahead of the earnings season that begins this week.
At around 13:55 GMT, the Dow Jones returned 0.44%, the Nasdaq index, which has a strong technology composition, fell 2.25% and the broader S&P 500 index lost 1.16%.
The New York indices followed the trend previously set by the Asian and then the European markets.
“Coming back from the weekend, sentiment is weighed down by growth fears,” Briefing.com’s Patrick O’Hare said in a note.
The market was concerned about a new wave of lockdowns in China, which spread to Macao on Monday, where residents are only allowed to go out for basic needs or get tested.
The news hit casino and hotel groups MGM Resorts International (-2.62%), Wynn Resorts (-6.77%) and Las Vegas Sands (-8.17%), all of which were distraught.
Wall Street also followed the energy dossier in Europe, which fears Russian gas supplies will not resume after Gazprom’s maintenance work on the two Nord Stream 1 gas pipelines, which began on Monday.
“There’s a lot to collect at the moment,” commented Tower Bridge Advisors’ Maris Ogg. “And of course the market doesn’t like uncertainty.”
“So it’s nice to see a rebound here or there,” like the S&P 500’s four-session streak of three gains over the past week, “but it doesn’t look like the long-term trend has changed,” he said the analyst.
It was time for caution on Monday, as the bond market showed, which was marked by a sharp fall in interest rates, a sign that investors are favoring these perceived safer assets.
The US 10-year Treasury yield fell below 3% to 2.98% from 3.08% on Friday.
The yield curve, a chart linking yields for major bond maturities, was still inverted, with a 2-year rate above the 10-year rate, a phenomenon often interpreted as a harbinger of a recession.
The VIX index, which measures market volatility, rose sharply by 7%.
Earnings season begins this week on Wall Street with PepsiCo on Tuesday, Morgan Stanley on Thursday and Wells Fargo and BlackRock on Friday.
According to CFRA’s Sam Stovall, analysts have recently lowered their estimates but still, on average, expect quarterly earnings to rise 5.2% year over year.
Still, they’re also seeing margins down 4.9%, still compared to the same period in 2021.
“Investors are wondering when analysts will start lowering their full-year 2022 estimates like economists have done for growth forecasts,” Sam Stovall said in a statement.
Maris Ogg recalled that several American companies had already taken the lead and warned operators not to change course, notably Microsoft or Salesforce.
“We already know that companies will tell us that the second quarter was fine, but that they are facing a strong dollar, inflation and rising labor costs,” which should weigh on their second-half results, she said. “Therefore I assume that the forecast will be lowered.”
In terms of valuation, Twitter rose (-6.68% to $34.35) following the announcement of the withdrawal of Elon Musk, who announced on Friday after the IPO that he was abandoning the takeover of the social network. The case now seems to have to go to court, which should extend the period of uncertainty about the future of the already weakened platform.
Tesla (-4.17% to $720.77), led by Elon Musk, fared little better, undermined by the general climate of risk aversion that penalized tech and growth stocks.
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