Stocks got crushed on Monday as tech led the drag. Tech behemoths known as the FANG stocks are all in a bear market, with Alphabet (GOOGL) joining the club as of market close. The ETF tracking the technology sector, XLK, is in a correction and has fallen 14% from its highs.
The S&P 500 (^GSPC) tumbled 1.67%, or 45.54 points, as of market close. The Dow (^DJI) fell 1.56%, or 395.78 points as industrial giant Boeing (BA) was the biggest loser in the index. Both the S&P and Dow had their worst day in one week.
The tech-heavy Nasdaq (^IXIC) got hit the hardest and plunged 3.03%, or 219.4 points, as Apple and other large-cap tech stocks dragged down the index. It was the Nasdaq’s worst day in nearly one month.
“Nearly 93% of the companies in the S&P 500 index having reported third-quarter earnings, Bloomberg data shows corporate earnings rising 26.3% overall on 8% growth in revenues … To date, 82.5% of firms that have reported have posted positive earnings surprises,” Oppenheimer said in a note to clients on Monday.
Earnings and economic calendar
This week is the unofficial end to earnings, and on Tuesday there will be a retail bonanza with Lowe’s (LOW), Target (TGT), Best Buy (BBY), Kohl’s (KSS), Ross Stores (ROST), T.J. Maxx (TJX), Hormel Foods (HRL) and Campbell Soup (CPB) reporting before the bell, and Foot Locker (FL) and Gap (GPS) reporting after market close.
A slew of housing data will be released Tuesday morning. Economists surveyed by Bloomberg are expecting October housing starts of 1.230 million versus 1.201 in the prior month. Housing starts month-on-month for October are expected to have grown by 2.4% after seeing a decline of 5.35% previously. Building permits for October are expected to come in at 1.26 million versus the 1.27 million revised in September. Building permits month-on-month for October are expected to have declined 0.8% after a growth of 1.7% previously.
Market commentary: CEOs are losing faith in the U.S. economy
According to the latest CEO confidence index from trade publication Chief Executive, CEOs now have their lowest confidence in business conditions for the next twelve months since October 2017.
And the litany of concerns should be familiar to those tracking the decline in economic sentiment we’re seeing expressed by investors and now executives — the trade war, rising interest rates, and a broad concern that we’re at the end of the economic cycle.
“Polled at the time of the midterm elections, CEOs told Chief Executive that while they feel good about the strength of the current business climate, their confidence in the next 12 months continues to waver due to the ongoing trade war, talent shortages, the Fed’s tightening of interest rates, end-of-cycle fears and the potential problems related to divided government in Washington,” Chief Executive said in its report.
Over the weekend, we noted that some strategists have seen the market action since early October as a sign of investors exiting a 2018-type mindset in which strong earnings and economic growth were seen as tailwinds and rising rates just a periphery concern. Now, rising interest rates and the end of the economic cycle are seen as headwinds for financial markets, while stellar quarterly earnings — earnings grew 25.7% in the third quarter for S&P 500 members, according to data from FactSet — are no longer enough to bolster investor confidence.
Comments from CNBC’s Jim Cramer late last week about what he’s hearing from executives about fears over the health of the markets and the U.S. economy also helped fuel the growing narrative that the stock market is sniffing out something is wrong with the U.S. economy despite continued forecasts from economists and policymakers that the expansion will continue indefinitely. Federal Reserve Chair Jerome Powell said in early October he thinks the economic expansion could continue “indefinitely.”
Stocks on Monday were lower across the board with the high-flying tech names we’ve seen under pressure for almost two months now at the heart of the market’s decline. Reports from The Wall Street Journal about internal turmoil at Facebook (FB) and a sharp drop in iPhone production plans from Apple (AAPL) continued the rolling waves of negative news dogging two of the market’s biggest winners during the post-election rally.
With Monday’s drop, Apple is now more than 20% off its all-time high while Facebook shares are down nearly 40%. All five FAANG names — which includes Alphabet (GOOGL), Amazon (AMZN), and Netflix (NFLX), alongside Facebook and Apple — are now down more than 20% from their highs hit earlier this year.
“Over the past several months, it’s become apparent even to the casual observer that the US equity market is acting differently,” Morgan Stanley equity strategist Michael Wilson said in a note published Monday. “Our view is that the market is sniffing out an earnings recession and a sharp deceleration in economic growth — something we have written about extensively.”
And while a number of economic indicators — GDP, consumer confidence, manufacturing surveys — point to a continuing economic expansion, it seems that the market’s economic message is starting to make its way to the C-suite.
Heidi Chung is reporter for Yahoo Finance. Follow her on Twitter: @heidi_chung.
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