Wall Street Opens Lower on Earnings Misses, Inflation Fear; Dow Down 500 Pts

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Wall Street Opens Lower on Earnings Misses, Inflation Fear; Dow Down 500 Pts
Credit: © Reuters.

By Geoffrey Smith 

Investing.com -- U.S. stock markets opened broadly lower again on Monday as inflation fears, embodied in rising bond yields and surging oil prices, combined with some weak-looking earnings to dampen sentiment.

While technology stocks underperformed again, losses were broad-based. By 9:45 AM ET (1445 GMT), the Dow Jones Industrial Average was down 518 points, or 1.4%, at 35,394 points, a four-week low. The S&P 500 was also down 1.3% and the Nasdaq Composite was down 1.5%. 

That came after a long holiday weekend during which U.S. Treasury bond yields had snuck up to their highest in over two years. The benchmark 10-year yield hit 1.85% before retracing to 1.81%, while the two-year yield rose above 1% for the first time since the start of the panic. Meanwhile, crude oil prices surged to a seven-year high as a drone strike by Iranian-backed militia in Yemen against the United Arab Emirates added to concerns that the world's biggest producers will struggle to meet their commitments to increase supplies to world markets. 

The mood was also soured by more disappointments on the earnings front, where Goldman Sachs (NYSE: GS ) joined JPMorgan and Citigroup (NYSE: C ) in reporting a decline from the sugar-rush highs of last year's results. Lower revenues from bond trading and a sharp rise in operating expenses were only partly offset by another strong quarter for deal-making revenue. Goldman stock fell 8.1% to its lowest since July. 

JPMorgan (NYSE: JPM ), whose report on Friday had kicked off the fourth-quarter earnings season, fell 3.0% to its lowest since September.

Macro data also disappointed, with the New York Empire State Manufacturing Index plummeting to a 19-month low as Omicron-variant Covid-19 spread across the state this month.

The general sell-off overshadowed some major M&A news, as Microsoft (NASDAQ: MSFT ) agreed to pay over $50 billion for troubled videogames publisher Activision Blizzard (NASDAQ: ATVI ). The deal will make Microsoft, which already owns the publisher of Minecraft, the world's third-biggest videogame company by revenue - a striking development given the doubts that CEO Satya Nadella had about the place of the Xbox in Microsoft's future when he took over at the helm of the software giant. For Activision, the deal represents an exit under irresistible pressure on CEO Bobby Kotick, who has been unable to fix long-running problems with the company's workplace culture.  Activision stock rose some 30% on the news, while Microsoft stock fell 1.5%. in line with the market.

Oil and gas stocks bucked the trend, firmly supported by the rise in crude prices. Exxon Mobil (NYSE: XOM ) stock rose 2.5% while Occidental Petroleum (NYSE: OXY ) stock rose 3.2% and Marathon Oil (NYSE: MRO ) stock rose 2.4%.

Elsewhere, Alibaba ADRs (NYSE: BABA ) came under pressure after Reuters reported that the company's Cloud hosting business in the U.S. is under scrutiny from regulators in the country, amid concerns that the data it is hosting may be accessible to the Chinese government. The ADRs fell 2.2%.

 

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