Why is the stock market down today? Dow is ahead of Google and Microsoft Earnings

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Wall Street will digest a flurry of US corporate earnings this week.

The time of dreams

Shares were down on Tuesday ahead of earnings reports from Microsoft and Alphabet after the bell. Concerns about global economic growth coming from China persist for now.

Shortly after opening, the


Dow Jones Industrial Average

fell 267 points, or 0.8%, while


S&P500

was down 1.1%, and the


Nasdaq Compound

decreased by 2%. The declines come after indices rallied from early losses on Monday, with the S&P 500 gaining 2.1% from its closing low.

It came as rising Covid-19 cases in China boost the possibility of more lockdowns in the country. This could prevent American companies from accessing the supply of goods and services, which would increase costs and force them to raise selling prices. Inflation is already a threat to consumer spending.

Markets are showing fear this week. Not only are stocks down on Tuesday, but money is rushing into safe assets, driving the price of the 10-year Treasury yield up and its yield down to 2.75% from 2.9% on Friday.

But Tuesday’s big events come after the close, when Microsoft (ticker: MSFT) and Google parent Alphabet (GOOGL) are due to report earnings, and tech heavyweights may have a say in the direction of the indexes.

Analysts expect Microsoft to post adjusted earnings of $2.19 per share on sales of $49 billion. Google is expected to make GAAP earnings of $25.74 per share, on sales of $68 billion. Both companies are expected to see sales increase year over year, while Google is expected to see earnings decline a little.

Investors are hoping to see both stocks appear after earnings, as they have already been hit hard. Microsoft and Google are down 15% and 17%, respectively, in 2022, hurt by rising bond yields. With stocks being much weaker now, they could rise even after a fairly unimpressive earnings result.

“Mega-cap NASDAQ names are oversold,” wrote Dennis DeBusschere, founder of 22V Research, adding that strong earnings reports could drive these stocks higher.

Either way, these stocks could move indices past earnings. Their combined market value of $3.86 trillion represents just over 10% of the total market capitalization of the S&P 500, large enough to drive the market up or down.

The earnings season went better than expected. Overall earnings per share on the S&P 500 beat expectations by just over 7%, according to Credit Suisse data. That has helped some stocks, but the S&P 500 has fallen further since the earnings season began in mid-April. The reason: while earnings were higher than expected, it may not be the best representation of what to expect going forward. The Federal Reserve is raising interest rates to avoid high inflation and other threats to global economic growth, such as the Russian-Ukrainian war and high commodity prices, remain.

Elsewhere, durable goods orders rose 0.8% month-on-month in March, below forecasts of 1% but well above last month’s result of a 1% decline, 7%.

Overseas, the pan-European


Stoxx 600

increased by 0.3%. the


Shanghai Composite

fell 1.4%, underperforming other stock exchanges in Asia as the severity of China’s Covid-19 lockdowns continued to pressure investor sentiment.

Bitcoin and other cryptocurrencies surged on Tuesday as the apparent correlation of digital assets and tech stocks continued after the tech-heavy Nasdaq Composite Index rose 1.3% on Monday.

Bitcoin
rebounded more than 5% in the past 24 hours to near $40,500. The price of the biggest crypto bottomed below $38,500 on Monday, but was trading as high as $43,000 at the end of last week.

Evercore ISI’s Mark Mahaney outlines his outlook for future tech earnings while iCapital’s Anastasia Amoroso explains where she looks for yield outside of stocks.

Here are five stocks moving on Tuesday:


PepsiCo

(PEP) rose 0.5% after the company reported earnings of 1.29 per share, beating estimates of $1.23 per share, on sales of $16.2 billion, above expectations of $15.56 billion.


3M

(MMM) fell 3% after the company reported earnings of $2.65 per share, beating estimates of $2.32 per share, on sales of $8.8 billion, above expectations of $8.7 billion.


General Electric

(GE) fell 8.5% after the company reported earnings of 24 cents per share, beating estimates of 8 cents per share, on sales of $17 billion, above expectations of 16, $9 billion.


DR Horton

(DHI) rose 1.8% after the company reported earnings of $4.03 per share, beating estimates of $3.38 per share, on sales of $8 billion, above expectations. expectations of $7.49 billion.


red fin

(RDFN) fell 6.4% after being downgraded to underweight from overweight at Piper Sandler.

Write to Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com

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