NEW YORK: Wall Street’s main indexes fell on Monday as stalled US-Iran peace talks kept markets on edge and investors awaited a torrent of earnings later this week to guide sentiment.
Dealing a new blow to peace prospects, President Donald Trump canceled a visit by two US envoys to Pakistan, where talks with Iranian counterparts were expected to take place.
Stocks have climbed to fresh highs in recent days on earnings optimism even as back-and-forth headlines on the US-Iran war swayed sentiment.
That optimism will face a key test during the quarter’s busiest stretch of earnings this week. According to Raymond James, companies accounting for roughly 44 percent of the S&P 500’s market capitalization are scheduled to report this week.
“It’s the outlook for tech rather than the outlook for the broader US economy that arguably matters most,” said James Reilly, senior economist at Capital Economics.
Of the 139 companies in the benchmark that reported as of Friday, 81.3 percent surpassed earnings expectations, compared with the prior four-quarter average of 78.1 percent, according to data from LSEG.
The information technology and materials sectors are expected to post the strongest earnings growth this quarter, the data showed.
“With earnings growth so concentrated in one part of the market and looking quite optimistic, any sign of weakness in tech earnings would likely weigh heavily on the S&P 500 even if earnings data from the rest of the index continued to beat expectations,” Reilly said.
Some analysts have also questioned how reliable the results are as a guide to future performance, since they reflect only one month of disruption linked to the Middle East war.
At 12:02 p.m. ET, the Dow Jones Industrial Average fell 123.83 points, or 0.25 percent, to 49,106.88, the S&P 500 dropped 8.86 points, or 0.12 percent, to 7,156.24 and the Nasdaq Composite was down 66.25 points, or 0.27 percent, at 24,762.66.
The trajectory of oil prices remains the biggest unknown, as the crucial Strait of Hormuz is still closed. Brent crude futures were trading about 3 percent higher on Monday and are 50 percent above pre-war levels.
Investors will also hear from Federal Reserve policymakers, who will gather in Washington this week in what may be Jerome Powell’s last meeting as head of the US central bank.
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