NEW YORK: The tech-focused Nasdaq fell more than 1% on Monday as megacap growth stocks including Apple, Amazon and Alphabet fell ahead of their earnings reports this week, while investors awaited the US Federal Reserve’s rate-setting meeting.
The central bank is seen hiking the Fed funds rate by 25 basis points (bps) at the end of its two-day policy meeting on Wednesday, followed by Fed Chair Jerome Powell’s speech, which will be scrutinized for any signs of further increases.
“How strong of a language he (Powell) uses is what it’s going to come down to,” said Andre Bakhos, president at Ingenium Analytics LLC in Bernardsville, New Jersey.
This will likely be the smallest rate increase since the Fed kicked off its tightening cycle 10 months ago with a 25 bps hike, with financial markets pricing in a final rate hike in March.
Money markets now see rates peaking at 4.9% in June, still below the 5% level expected by Fed policymakers.
After a slew of layoffs by large-cap tech and financial firms through the month, investors will now keep an eye on the Labor Department’s January nonfarm payrolls data expected on Friday.
A total of 107 S&P 500 firms are expected to report quarterly results in the busiest week of the earnings season, including heavyweight growth companies Apple Inc, Amazon.com Inc, Alphabet Inc and Meta Platforms Inc, each down between 1% to 2%.
Analysts expect S&P 500 earnings for the fourth quarter to decline 3%, compared with a 1.6% drop expected at the beginning of the year, according to Refinitiv data.
Wall Street is expected to end the month higher, with the Nasdaq and the S&P 500 Growth index recouping more than half their monthly losses from December. The S&P 500 index is set for the best start to the year since 2019.
Tighter monetary policies have stood in the way of growth firms expanding their businesses, which have also been pressured for much of last year by high Treasury yields.
Bakhos said that the decline in growth stocks on Monday could be due to some profit-taking, noting that earnings from these companies could be less dire than what most expect.
The European Central Bank and the Bank of England are also seen raising interest rates later in the week.
At 12:31 p.m. ET, the Dow Jones Industrial Average was down 79.27 points, or 0.23%, at 33,898.81, the S&P 500 was down 30.03 points, or 0.74%, at 4,040.53, and the Nasdaq Composite was down 149.66 points, or 1.29%, at 11,472.05.
Johnson & Johnson slipped 3% on the dismissal of a bankruptcy petition filed by its LTL Management unit by the 3rd US Circuit Court of Appeals.
American Express Co rose 2.7% after several brokerages raised price targets on the stock on its strong full-year forecast.
Declining issues outnumbered advancers for a 1.70-to-1 ratio on the NYSE and for a 1.66-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and no new lows, while the Nasdaq recorded 46 new highs and 13 new lows.
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