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Stocks Decline Amid Earnings, Economic Concern: Markets Wrap

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Claire Ballentine and Vildana Hajric
·3-min read
Stocks Decline Amid Earnings, Economic Concern: Markets Wrap
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(Bloomberg) -- U.S. stocks fell for a second day as rising virus cases around the world led to renewed concern over the continued economic impact, overshadowing a batch of solid corporate results.

The S&P 500 extended its slide from an all-time high, with investors showing caution ahead of the brunt of the earnings season. All eyes will be on whether an anticipated rise in profits will bring with it forecasts for stronger growth ahead. International Business Machines Corp. climbed after reporting its largest revenue growth in 11 quarters, while United Airlines Holdings Inc. paced a selloff in travel stocks on a bigger-than-expected loss. Netflix Inc. plunged in postmarket trading as its first-quarter subscriber growth fell short of the average analyst estimate.

Other corporate highlights:

Johnson & Johnson posted stronger-than-expected sales, while Travelers Cos.’s earnings beat estimates and Philip Morris International Inc. raised its outlookProcter & Gamble Co. is boosting the prices of some consumer products as the household-goods behemoth grapples with higher commodity costs

While American equities are trading at a valuation that’s about 35% above the average of the past decade, investors are focused on what’s forecast to be the best earnings season in two years. One of their biggest concerns is whether companies are equipped to handle mounting inflation pressures as the economic recovery gains momentum.

“Earnings season is ramping up, and there’s this concern about how the multinationals will give their guidance in view of the fact that we haven’t drawn a line under Covid yet,” said Fiona Cincotta, senior financial markets analyst at City Index. “That is just starting to unnerve investors. Demand for riskier assets has come off.”

For David Donabedian, chief investment officer at CIBC Private Wealth Management, the stock market has been just taking a breather after a big rally, but there are still reasons to be bullish.

“The economic recovery has taken hold, the earnings recovery has taken hold, everything we’ve seen from first-quarter earnings so far has been that it’s going to be a blowout quarter,” he said.

Elsewhere, the dollar rose for the first time in seven sessions, while the Treasury 10-year yield dropped to the lowest level in more than five weeks.

Here are some key events to watch this week:

EIA crude oil inventory report on Wednesday.European Central Bank rate decision and President Christine Lagarde briefing on Thursday.U.S. releases new home sales data Friday.

These are some of the main moves in markets:

Stocks

The S&P 500 decreased 0.7% at 4 p.m. New York timeThe Nasdaq 100 dipped 0.7%The Dow Jones Industrial Average decreased 0.8%The Russell 2000 dropped 2%The Stoxx Europe 600 sank 1.9%The MSCI World index dipped 0.9%

Currencies

The Bloomberg Dollar Spot Index advanced 0.2%The euro was little changed at $1.2035The Japanese yen appreciated 0.1% to 108.09 per dollar

Bonds

The yield on 10-year Treasuries fell four basis points to 1.56%Germany’s 10-year yield fell three basis points to -0.26%Britain’s 10-year yield fell two basis points to 0.731%

Commodities

West Texas Intermediate crude fell 1.5% to $62.44 a barrelGold climbed 0.5% to $1,779.10 an ounce.

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