The Nasdaq led Wall Street losses on Monday as Tesla shares came under pressure on the company’s plans to increase spending, while investors awaited results from megacap companies and key economic data this week.
Tesla Inc (TSLA.O) dropped 3.4% after the automaker raised its capital expenditure forecast for 2023 to ramp up output, weighing down consumer discretionary stocks (.SPLRCD).
Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O), Amazon.com Inc (AMZN.O) and Meta Platforms Inc (META.O), which constitute more than 14% of the value of the benchmark S&P 500 (.SPX), are scheduled to report results this week.
A rally in these stocks has supported Wall Street this year, and investors are waiting to see if the gains can continue amid a gloomy economic outlook.
“It’s a make or break week for (tech) stocks, if earnings don’t disappoint then the market can continue to rally,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
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 banking crisis in March.
Of the 90 S&P 500 companies that have reported first-quarter results so far, nearly 77% have topped analysts’ profit estimates, as per Refinitiv IBES data. The long-term average beat rate stands at 66%.
Forecasts for earnings have also improved marginally, with analysts expecting a quarterly profit contraction of 4.7% versus a 5.1% decline estimated at the start of April.
Early readings of first-quarter U.S. GDP, personal consumer expenditure index (PCE) for March, consumer confidence numbers for April are among the data scheduled for release this week.
Mixed economic numbers last week cemented bets of a 25-basis-point rate hike by the Fed in May, with money market traders pricing in a 92% chance of such a move, as per CME Group’s Fedwatch tool.
Most Fed policymakers over the past week acknowledged the central bank has more work to do on bringing down inflation, before entering the blackout period until the next policy meeting.
U.S. Treasury yields eased following recent signs of slowing inflation and economic activity, though investors appeared increasingly concerned about a potential standoff over the U.S. debt ceiling.
U.S. House of Representatives Speaker Kevin McCarthy said the House would vote on his spending and debt bill this week amid lingering concerns that the U.S. government could hit its debt ceiling sooner than expected.
At 11:44 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 52.81 points, or 0.16%, at 33,756.15, the S&P 500 (.SPX) was down 12.52 points, or 0.30%, at 4,121.00, and the Nasdaq Composite (.IXIC) was down 98.14 points, or 0.81%, at 11,974.32.
Defensive sectors healthcare (.SPXHC), utilities (.SPLRCU) and consumer staples (.SPLRCS) were among the rare gainers.
First Republic Bank (FRC.N) gained 6.3% ahead of its quarterly report. The regional bank’s shares have sunk 88% this year triggered by the U.S. banking crisis.
Declining issues outnumbered advancers by a 1.05-to-1 ratio on the NYSE and a 1.75-to-1 ratio on the Nasdaq.
The S&P index recorded 17 new 52-week highs and two new lows, while the Nasdaq recorded 52 new highs and 139 new lows.