The stock market was trying to rebound Monday from Friday’s steep losses as investors look ahead to Wednesday’s FOMC meeting.
Shortly after opening, the
Dow Jones Industrial Average
slipped 62 points, or 0.2%, while
fell 0.3%, and the
decreased by 0.3%.
The market is trying to recover from Friday’s selloff, which saw the Dow Jones drop almost 3%, the S&P 500 lose more than 3% and the Nasdaq drop more than 4%. But if investors were looking for reasons to keep buying, they were hard to find. There “was no improvement over the weekend on the three headwinds that are pressing equities: Chinese growth concerns, war in Ukraine and the hawkish Fed,” wrote Tom Essaye. , founder of Sevens Report Research.
China’s zero-tolerance policy for the spread of Covid-19 is shutting down some economic activity, with its services and manufacturing purchasing managers’ indices falling below 50, the level which separates a growing economy from a contracting economy, in March . China’s slowing growth is already prompting some companies to warn investors about second-quarter earnings, with
Apple (ticker: AAPL) saying it could see sales of $4 billion to $8 billion hit in the quarter due to limited supply from China.
Other economic concerns persist. The Federal Reserve is intent on bringing down high inflation by raising short-term interest rates and reducing its holdings of bonds, which lowers bond prices and raises bond yields. It’s nothing new for investors, but the market is still trying to figure out how fast the Fed will go and how fast it will reduce its balance sheet, a process known as quantitative tightening.
The stock market still has a long way to go before it looks like the markets are turning decidedly bullish. The S&P 500 is still 11% below its March 29 level, which marked a multi-month high. It is still below its 50-day moving average, indicating that market participants are still not comfortable buying stocks at levels consistent with their recent trend.
“With the SPX coming off of one of its worst months in the past half-century…with the specter of aggressive rate hikes in the near future, the mood isn’t exactly bullish,” Frank wrote. Cappelleri, Chief Market Technician at Instinet.
Sentiment in the market remains weak at the moment as the appetite to buy stocks has yet to fully rebound. A survey of individual investor sentiment shows a 13-week average that’s near a multi-decade low, according to 22V Research. “Sentiment readings remain depressed as investors work amid uncertainty related to U.S. monetary policy, European growth, and China’s COVID lockdowns and stimulus,” wrote Dennis DeBusschere, founder of 22V Research.
The Fed makes its decision on how quickly to raise interest rates — which it likely will — this Wednesday afternoon.
“There will be clarity on the US policy front this week, laying the groundwork for another potential positive narrative shift,” DeBusschere wrote.
Shares in Asia fell on Monday after data showed Chinese manufacturing activity contracted more than expected in April, as continued strict shutdowns in Shanghai and other cities disrupted production. Shanghai stock markets were closed.
Here are six stocks in motion on Monday:
Amazon.co.uk (AMZN) fell 2% after the stock fell sharply on Friday following a weaker-than-expected second-quarter sales forecast.
Apple stock fell 0.6%. The European Commission has filed a formal complaint against the company for abusing its position in the mobile wallet market. Shares fell 3.7% on Friday after the tech giant issued a cautious outlook for the June quarter.
Global Payments (GPN) fell 8% after the company reported earnings of $2.07 per share, beating estimates of $2.04 per share, on sales of $2.16 billion, above expectations of $1.95 billion.
ON Semiconductor (ON) gained 3.2% after the company reported earnings of $1.22 per share, beating estimates of 17 cents per share, on sales of $1.95 billion, above expectations of $1.91 billion.
Berkshire Hathawayit is Class B shares (BRK.B) fell 0.3% after the Warren Buffett-led conglomerate reported first-quarter after-tax operating profit of $7 billion, up less than 1% compared to the prior year period as the company reduced its share buyback as the stock price rebounded.
American certificates of deposit of
NIO (NIO) rose 2.3% after deliveries of its electric vehicles in April fell from the previous month.