Mid-day: Mega-caps lead market lower in front of earnings

The stock market is having a terrible performance day, as the mega-caps flounder in front of their earnings reports this week and growth concerns continue to weigh on sentiment. The S&P 500 is down 1.8%, the Nasdaq Composite is down 2.8%, and the Dow Jones Industrial Average is down 1.6%.

The S&P 500 information technology (-2.5%), consumer discretionary (-3.9%), and communication services (-2.4%) sectors, which outperformed yesterday, are now leading the retreat. The energy sector (+2.2%) is the only sector trading higher, thanks to higher oil prices ($102.01, +3.48, +3.5%).

Briefly, there are concerns that the mega-caps earnings, starting with Microsoft ( MSFT 273.99, -6.73, -2.4%) and Alphabet ( GOOG 2401.45, -53.55, -2.6%) after the close, could disappoint and, if not, then the reactions will disappoint.

Earnings reports released since yesterday’s close were mostly better than expected, but the mixed reactions in 3M ( MMM 144.30, -4.31, -2.9%), UPS ( UPS 184.27, -5.38, -2.8%), General Electric ( GE 79.85, -10.03, -11.2%), PepsiCo ( PEP 174.55, +0.78, +0.5%), Sherwin-Williams ( SHW 271.96, +23.94, +9.7%), and Whirlpool ( WHR 188.86, +9.99, +5.6%) have added to the uncertainty.

Tesla ( TSLA 902.20, -95.73, -9.6%), which reported last week, is getting hit harder than other growth stocks amid separate concerns that Elon Musk could sell shares in the future to manage his ownership of Twitter ( TWTR 49.88, -1.83, -3.5%).

Regarding growth concerns, look no further than the Treasury market, where yields are down sharply for the second straight day. The 2-yr yield is down six basis points to 2.57%, and the 10-yr yield is down six basis points to 2.77%. The U.S. Dollar Index is up 0.4% to 102.17.

Investors have worried about lockdown risks in Beijing and a stark warning from Russia’s foreign minister, who warned western countries of a “considerable” chance for nuclear war if weapon deliveries to Ukraine continue, according to Bloomberg .

The downside volatility has kept investors on edge and scrambling for downside protection. The CBOE Volatility Index is up 12.4% to 30.38.

Reviewing today’s economic data:

  • Total durable goods orders increased 0.8% month-over-month in March (Briefing.com consensus +1.1%) following an upwardly revised 1.7% decline (from -2.2%) in February. Excluding transportation, durable goods orders increased 1.1% month-over-month (Briefing.com consensus +0.5%) following an upwardly revised 0.5% decline (from -0.6%) in February.
  • The key takeaway from the report is that it conveyed a nice rebound in order activity after a brief slump in February. Notably, new orders for nondefense capital goods, excluding aircraft – a proxy for business spending – jumped 1.0% following a 0.3% decline in February.
  • New home sales decreased 8.6% month-over-month in March to a seasonally adjusted annual rate of 763,000 units (Briefing.com consensus 770,000) from an upwardly revised 835,000 (from 772,000) in February. On a year-over-year basis, new home sales were down 12.6%.
  • The key takeaway from the report is that sales of lower-priced homes have lessened as a percentage of overall sales, likely due to less supply resulting from cost and supply chain pressures for builders, and emerging pressures from rising mortgage rates that are reducing affordability for lower-income buyers. That is leading to higher-priced homes accounting for a larger percentage of new homes sold, which is driving up both median and average selling prices.
  • The Conference Board’s Consumer Confidence Index dipped to 107.3 in April (Briefing.com consensus 106.0) from an upwardly revised 107.6 (from 107.2) in March. In the same period a year ago, the index stood at 117.5.
  • The key takeaway from the report is that consumers’ expectations did not worsen in spite of the inflation pressures and the war in Ukraine, although it was noted that purchasing intentions are down overall from recent levels.
  • The S&P Case-Shiller Home Price Index was up 20.2% year-over-year in February (Briefing.com consensus 18.9%) while the FHFA Housing Price Index increased 2.1% month-over-month in February.