Stock Market Opens Earnings Season With Declines; Tech, Communications Lead Stocks Lower

The stock market sold off Monday morning as investors geared up for earnings season amid fears of another high inflation reading this week. Technology, communications services and consumer discretionary sectors led the declines, with Apple (AAPL) and Amazon.com (AMZN) both falling more than 1%.

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The Nasdaq composite led declines among the major indexes, dropping 1.8%. The S&P 500 fell 1%, and the Dow Jones Industrial Average dropped 0.5%. The small-cap Russell 2000 was down 1.7%. The Innovator IBD 50 ETF (FFTY) fell 1%.

Volume rose on the Nasdaq and the NYSE compared with the same time on Friday.

Investors are looking for signs that inflation will begin to tick down from May’s 8.6% report, the highest inflation rate since 1981. The consumer price index for June will be released on Wednesday, with Econoday estimates of an 8.8% increase.

Stock Market Waits For Earnings Season

Chinese stock markets traded lower Monday as China’s Covid cases continued to rise at the fastest pace since May, threatening supply chains. The Hong Kong Hang Seng Index plunged 2.8%, and the Shanghai composite dropped 1.3%. Japanese stocks bucked the trend, with the Nikkei 225 index up 1.1%.

European stocks also fell, with the London FTSE 100 off 0.3%, the German DAX down 1%, and the French CAC 40 index falling 0.8%.

Earnings among companies in the S&P 500 are projected to have risen 4.3% in the second quarter from a year earlier as of Friday, according to FactSet. That’s the slowest pace of growth since the fourth quarter of 2020.

Looking ahead to this week’s earnings, soda giant PepsiCo (PEP) will report second-quarter results after the close. Delta Air Lines (DAL) will report Wednesday. Banking giants JPMorgan Chase (JPM) and Morgan Stanley (MS), along with Taiwan Semiconductor Manufacturing (TSM) will report Thursday morning. Citigroup (C), UnitedHealth (UNH), BlackRock (BLK) and Wells Fargo (WFC) wrap up the trading week with earnings reports on Friday.

UnitedHealth briefly broke out of a cup with handle Friday with a buy point of 518.80 and remains below the entry.

Solar stocks were getting hit on Monday, with Daqo New Energy (DQ) and Enphase Energy (ENPH) both dropping more than 3%.

Twitter Drops As Musk Seeks To End Buyout

Twitter (TWTR) tumbled more than 8% Monday after Tesla (TSLA) CEO Elon Musk said he is seeking to terminate his $44 billion deal for the social media giant due to the number of spam and fake accounts on the platform. Twitter said it plans legal action and is committed to closing the transaction at the agreed-upon price of $54.20 per share.

Lululemon Athletica (LULU) declined more than 5% after Jefferies downgraded the stock from hold to underperform.

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Also Monday, President Joe Biden’s approval rating is seeing a modest rebound in July after sinking to the lowest point of his presidency. But his standing among independents has never been lower, the new IBD/TIPP Poll finds.

Biden’s approval rating perked up 1.5 points to 44.5 over the past month as some Democrats came back into the fold. The IBD/TIPP presidential job approval measure indicates that 44.5% of adults surveyed approve of Biden’s job performance and 55.5% disapprove, excluding those who were unsure or declined to state an opinion.

The yield on the 10-year Treasury note slipped 9 basis points to 3.0%.

The price of U.S. crude oil fell 2% to below $103 a barrel.

Follow Michael Molinski on Twitter @IMmolinski

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