Stocks took it on the chin on Tuesday.
Coming off a Monday that saw the major averages close little-changed, stocks reversed lower during morning trade and never got any momentum going, with the Dow dropping more than 550 points at its lows on Tuesday.
Tech stocks were the biggest loser on Tuesday with the Nasdaq dropping 1.8%, or 132 points, as shares of Google parent company Alphabet (GOOGL) fell 4.7% and brought tech giants Amazon (AMZN), Facebook (FB), and Apple (AAPL) all lower in sympathy.
The Dow, meanwhile, dropped 424 points, or 1.7%, with 3M (MMM) and Caterpillar (CAT) each dropping more than 6%. Caterpillar’s intraday reversal was a remarkable 10% after the stock initial popped following earnings that beat expectations. On its earnings call, however, Caterpillar executives said higher costs would pressure the company later this year.
Before the stock market sell-off became the main event on Tuesday, investors were focused on the 10-year Treasury yield, which topped 3% for the first time since January 2014, though the 10-year settled a touch below this level at 2.9995% on Tuesday, according to data from Bloomberg.
And while some cited the 10-year hitting 3% and a growing fear that investors are under-appreciated the impacts that higher inflation and higher rates could have on corporates, Torsten Sløk, chief international economist at Deutsche Bank, said, “Stocks are too worried about 3% today.”
Adding, “The earnings season is going really well and at the macro level corporate America has plenty of cash and hence little borrowing needs, so companies are not impacted much by higher long rates.”
On Wednesday, investors will be looking for a rebound in the stock market after Tuesday’s ugly action, but as we’ve noted twice in recent days, a lack of corporate buyers could be partly to blame for the decline seen Tuesday.
Market catalysts on Wednesday, however, won’t be much different from Tuesday, it’s only that the names will change.
Before the market open, Twitter (TWTR), Boeing (BA), General Dynamics (GD), and Comcast (CMCSA) will be among the companies reporting earnings. And after the close, Facebook (FB), AMD (AMD), Visa (V), Chipotle (CMG), and eBay (EBAY) will report earnings.
Facebook will be the main event, as investors will be closely tracking the social network for any signs that its recent problems with handling user data are impacting behavior on the website. Additionally, the company’s outlook for expenses in 2018 — which CEO Mark Zuckerberg has said are likely to rise in the quarters and years ahead — will be a key metric for investors.
According to estimates from Bloomberg Intelligence, Facebook’s forecast of a 45%-60% increase in expenses in 2018 puts the company at risk of missing the earnings per share outlook held by Wall Street right now if revenue remains in-line with estimates.
In the first quarter, Wall Street expects Facebook’s adjusted earnings per share will hit $1.62 with revenue expected to come in at $11.4 billion, according to estimates compiled by Bloomberg.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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