With the S&P 500 up 8% since the start of this year, absent of any other context, it may seem strange that stocks are down today. However, in the trailing five sessions, the benchmark index has actually slipped into the red, raising concerns about a loss of momentum. Specifically, many analysts are looking toward key earnings releases of blue-chip companies. In addition, investors’ concerns about future monetary policy are spiking.
This afternoon, the S&P is up just slightly while the tech-centric Nasdaq Composite is slightly in the red. Meanwhile, the venerable Dow Jones is also popping its head into positive territory, albeit by the slimmest of margins.
Why are stocks down today? For one, anticipation around earnings for big-cap tech giants is imposing an ambiguous environment. In particular, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META) are all set to disclose first-quarter results later this week.
Citing FactSet data, CNBC reports that about “76% of S&P 500 companies that have reported earnings through Monday morning beat analyst earnings estimates.” However, information from Refinitiv points out that Q1 earnings for S&P companies may decline 5.2% overall.
“Investors are, a little bit, in a wait-and-see mode: waiting to see what happens with big tech earnings this week,” said Chris Zaccarelli, Chief Investment Officer at the Independent Advisor Alliance. Zaccarelli also cautioned that major indices have already priced in much of the good news from earnings so far. “It’s going to take a lot more for tech earnings this week to really move the needle on the stock prices,” the expert stated.
Why Are Stocks Down Today? Look to the Fed.
Another catalyst that may explain why stocks are down today centers around the Federal Reserve. As CNBC mentions, investors will be watching closely for “new economic data,” specifically fishing for clues about inflation. If the pace of rising prices cools, the Fed might be open to mitigating its previously hawkish stance. However, if prices remain stubbornly high, the central bank could announce another rate hike at its next meeting in early May.
Looking ahead, various entities will release Q1 GDP figures and April’s consumer sentiment data later this week. Regarding the former, economists expect a print of 2.2%, down from 2.6% in Q4 2022, according to Yahoo Finance.
“It’s getting harder to find an economic indicator that’s saying the economy isn’t already in a recession right now let alone on the verge of one,” said Bespoke Investment Group in a research note.
Why It Matters
Finally, news about the bankruptcy of embattled retailer Bed Bath & Beyond (NASDAQ:BBBY) also explain why stocks are down today. After a funding partner bailed on the company, the retailer was operating on borrowed time.
Still, not everyone on Wall Street is broadcasting pessimism. Baird Managing Director and Market Strategist Michael Antonelli says that, although recession fears persist, “companies are still performing pretty well.”
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
