According to Bloomberg News, US equities plunged at the beginning of a busy week for corporate earnings as investors closely watch results for the effect of inflation and how it will impact consumer spending as the Federal Reserve gears up for tightening of policies.
The Downward Trend
The trend continued after the closing of the cash market, as results from Texas Instruments Inc., Microsoft Corp, and Alphabet Inc. were disappointing. The largest ETF that keeps track of NASDAQ 100 plunged by another 1% following the tech-heavy index drop by almost 4% to an eleven-month lowest. There was a loss of 4.5% by Alphabet, and Microsoft erased the losses so that it could gain by 0.5% as of 4:32 pm in New York.
The S&P 500 slid 1.9%, and NASDAQ 100 lost 2.9%, nullifying the choppy gains of Monday. General Electric Co. declined following a disheartening profit prediction on the supply chain. Tesla Inc. was found to drop when Elon Musk agreed that he would be using his fortune to get Twitter Inc. Oil prices, Treasuries, and the dollar were rising.
The prospects of a slowing economic expansion aside from consistent inflation are causing an anxious market mood. The wide array of risks spreads over the pandemic, disruptions in the supply chain, Federal Reserve tightening to tame inflation, and the ongoing Russian Ukraine war.
Bloomberg News reports that economist and portfolio strategist associated with New York Life Investments, Lauren Goodwin states that there is no doubt that growth in the economy is in jeopardy. As inflation and wages get higher, a soft landing is getting smaller. The main question related to portfolios now is not whether there will be high inflation ruling will be increased; instead, whether the asset allocation will be able to keep pace with slower growth is what will matter.
There is some solace in the US corporate earnings. For equity bulls that is close to 80% of firms have countered profit anticipations, including the likes of Pepsico Inc., United Parcel Service Inc., and GE. As far as disappointing forecasts are concerned, it is for JetBlue Airways Corp, which is weighing on shares.
