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U.S. stocks continued to slide on Tuesday, as global Covid-19 cases hit record highs and first-quarter earnings season has become a sell-the-news event. Many on Wall Street had been calling for a pullback after four straight weeks of gains for major U.S. stock indexes, and this week has delivered exactly that.
The
was down 236 points, or 0.7%, around midday on Tuesday. The
fell 0.7%, the
declined 0.9%, and the small-cap
dropped 2.1%.
It’s another busy day for earnings reports, with
(ticker: NFLX),
(PG),
(JNJ), and
(LMT) among the major companies reporting Tuesday.
On the macro front, global Covid-19 cases have increased by over 5.4 million over the past week, according to data from Johns Hopkins University. That’s a record for a seven-day period since the start of the pandemic, and more than double the weekly rate of confirmed infections as recently as in mid February.
India has become the global hot spot, but cases are elevated in Germany, Turkey, Japan, Argentina, and several other countries. Local news reports suggested that new restrictions or delayed reopenings could be coming soon in several countries.
Taken all together, it’s a reminder that despite the rapid vaccine rollout in the U.S., the world remains far away from an end to the Covid-19 pandemic.
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Although still early in first-quarter earnings season, the trend so far has been toward large beats. Through the end of last week, S&P 500 companies had topped Wall Street earnings estimates by 36% on a size-weighted basis, according to Credit Suisse’s Jonathan Golub. Roughly four out of five companies have beaten analysts’ forecasts.
But with robust economic data in the first quarter and expectations of a strong earnings season no secret on Wall Street, stocks had rallied in the lead up to earnings season. The S&P 500 had closed at at least two standard deviations above its 50-day moving average for nearly two weeks straight coming into this week, according to Bespoke Investment Group, which it classifies as “extreme” overbought territory. A streak that long has only happened a handful of times in the past two decades.
And the S&P 500 was also at some 16% above its 200-day moving average on Friday, at the 97th percentile of its post-war history.
So there were both some short-term and longer-term technical reasons for a pullback this week. Negative Covid news abroad and good earnings news already being priced in just provided the trigger for investors to take profits.
“Investors struggled to find a catalyst that could justify further gains, particularly amidst a global rise in Covid cases that is one of the fastest since the pandemic began,” said Jim Reid, a strategist at Deutsche Bank. “That said, this pullback still leaves the S&P 500 and the STOXX 600 at their third and second highest ever levels respectively [at Monday’s close,] so let’s not get too carried away.”
In Asia on Tuesday, Tokyo’s Nikkei 225 fell 2%, while Hong Kong’s Hang Seng ticked up 0.1% and the Shanghai Composite Index dipped 0.1%. In Europe, the FTSE 100 in London fell 2%, the CAC 40 lost 2.1% in Paris, and Frankfurt’s DAX slipped 1.6%.
(CNI) made a $325 per share cash-and-stock offer to acquire
(KSU), exceeding
‘s (CP) $275 per share cash-and-stock bid from last month. Kansas City Southern stock jumped 16% to a record high. Canadian National shares lost 6.2% and Canadian Pacific’s fell 2.1%.
Shares in Big Tobacco companies fell Tuesday following a Wall Street Journal report on Monday that the White House could introduce new regulations on nicotine levels in cigarettes, affecting how addictive the products are.
(MO) stock fell 4.5% following a loss of about 6% on Monday.
(PM) stock added 2.4% after reporting better-than-expected results on Tuesday morning.
Read the Journal report: Biden Administration Considering Rule to Cut Nicotine in Cigarettes
Shares in Italian soccer club
(JUVE.Italy) fell 4.2% in Milan, erasing some of 18% gains on Monday following news that the club would join a prospective breakaway European Super League of top clubs. Backlash from fans and politicians against the new league continued on Tuesday. Shares in
(MANU)—listed in the U.S.—were down 3.3% after climbing near 7% Monday.
Read this: European Soccer’s ‘Super League’ Has Thrown the Sport Into Chaos. What’s It All About?
(UAL) shares dropped 9.1% after the company posted a loss of $7.50 a share, missing estimates for a loss of $7.05 a share, on revenue of $3.2 billion, which was in line with expectations.
(XRX) shares fell 5.2% after the company posted mixed earnings results. The company reported earnings of 22 cents a share on revenue of $1.7 billion, against estimates for earnings of 29 cents a share and revenue of $1.6 billion.
(NKE) shares were down 4.2% after Citigroup downgraded the stock to Neutral from Buy.
(PG) shares added 1.2% after the company posted earnings per share of $1.26 on revenue of $18.1 billion, beating estimates.
(FSR) shares jumped 5.3% after BofA Securities initiated coverage of the electric-vehicle startup at Buy.
Johnson & Johnson (JNJ) stock added 2.8% after the pharmaceuticals and consumer-goods giant reported adjusted earnings per share of $2.59 amid revenue of $22.3 billion in the latest quarter. Analysts’ consensus had been for $2.34 and $22 billion.
(IBM) stock jumped 4.2% after the company beat first-quarter earnings and sales forecasts and added 2021 free cash flow guidance ahead of Wall Street’s estimates.
(AAPL) stock slipped 1.1% ahead of its virtual event on Tuesday, where it is expected to unveil new iPads and other products.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
