U.S. stocks fell to start the week as investors prepare for fresh inflation data and corporate earnings that could influence the Federal Reserve’s path ahead for interest-rate increases.
The S&P 500 fell about 1% as the broad-market index started the week off on a negative note. The Nasdaq Composite Index shed 1.9% as technology stocks lost ground. The Dow Jones Industrial Average was 0.4% lower.
Stocks staged a recovery in recent days, with the S&P 500 rising nearly 2% last week. The rally cooled on Friday after a stronger-than-expected jobs report showed the labor market is still hot, raising the probability that the Federal Reserve could continue with aggressive interest rate increases and potentially cause a recession. The next key data release, the U.S. consumer-price index for June, is on Wednesday.
“It’ll be interesting to see how the market trades following that news,” said
Charlie Ripley,
senior investment strategist for Allianz Investment. “It doesn’t appear like we’re going to have a decline in inflation any time soon.”
Investors are also awaiting corporate earnings reports for indications of how much higher prices and weaker consumer sentiment have eroded companies’ profits. Americans expect lower inflation increases over the longer run, a new Federal Reserve Bank of New York report said.
“We’re in a backdrop where central banks are going to continue raising interest rates and the underlying market narrative continues to be one of potentially rising recession risks. We’re going to see markets react to different data points, react to earnings,” said
Laura Cooper,
a macro strategist at BlackRock. “That sets us up for quite a volatile period ahead.”
“We’re cautious on equities, we’re not advocating for ‘buy the dip’ at this current juncture,” Ms. Cooper said.
Major financial firms including JPMorgan Chase and Morgan Stanley are scheduled to report earnings on Thursday, followed by BlackRock, Citigroup and Wells Fargo on Friday. KBW Nasdaq Bank Index was down about 1% in recent trading.
Many household-name firms are also set to post earnings this week, including PepsiCo on Tuesday and
Delta Air Lines
on Wednesday.
“These are going to be huge bellwethers on consumer confidence, on spending. The guidance will be really important, these guys have incredible insight about how the consumer is behaving and how they expect this to evolve over the rest of the year,” said
Fahad Kamal,
chief investment officer at Kleinwort Hambros.
TWTR -9.26%
fell 8%.
Elon Musk
filed a statement on Friday evening, saying he was terminating his $44-billion bid for the social-media company, saying it had violated the merger agreement. Twitter also put out a statement indicating it will sue Mr. Musk.
Other tech stocks fell, with
parent Meta Platforms recently down 4.4% and
Netflix
lost 3.7%. Shares of
Broadcom
were down 3.2% after after the microchip company announced the departure of its president.
Bond markets continued to flash a key warning sign. The U.S. yield curve remained inverted, with yields on shorter-dated bonds above those of longer-dated debt. The yield on the benchmark 10-year Treasury note edged down to 2.994% from 3.098% on Friday. The two-year Treasury yield was at 3.035%.
Oil prices extended their decline. Brent, the global benchmark for crude, retreated 1.5% to trade at $102.86. It fell more than 4% last week.
It is about “the concern that we are going to see a sharp decline in demand on the back of the deteriorating growth backdrop,” Ms. Cooper said. “That’s notably playing out in the commodity space.”
Cryptocurrencies also came under more pressure. Bitcoin traded around $20,500, a 6% drop from its level at 5 p.m. ET on Friday. Ether tumbled 8%.
Overseas, the pan-continental Stoxx Europe 600 slid 0.4%, while the euro continued to trade near parity with the U.S. dollar. The Nord Stream pipeline which transports Russian gas to Germany and other Western European countries shut for planned maintenance starting Monday.
Uniper
fell 16%, extending last week’s 30% plunge. The utility has asked for a bailout from the German government, saying it has been hit by dwindling gas supplies.
JPMorgan Chase and Morgan Stanley will report earnings later this week.
Photo:
BRENDAN MCDERMID/REUTERS
In Asia, most major benchmarks declined. Chinese stocks dropped after Shanghai reported its first local case of the BA.5 Omicron subvariant on Sunday, and the country recorded more than 2,300 locally transmitted Covid-19 cases nationwide over the last seven days. The Shanghai Composite Index slipped 1.3% and Hong Kong’s Hang Seng Index fell 2.8%.
Officials in Macau set a weeklong shutdown of casinos and other businesses to combat the surge in cases. Gambling stocks tumbled, with
Sands China
sliding 8.2%,
Wynn Macau
shedding 6.7% and
Galaxy Entertainment Group
down 4.9%.
Over the weekend, Beijing fined some of the country’s largest internet companies for failing to make proper antitrust declarations, weighing on tech stocks.
Alibaba,
Tencent Holdings and Ping An Healthcare & Technology, which were named in the latest executive punishment notices, fell 5.8%, 2.9% and 3.4%, respectively.
In Japan, the Nikkei 225 index rose 1.1% on Monday after current Prime Minister Fumio Kishida’s ruling coalition won the majority of parliamentary seats in an election on Sunday. The Japanese yen dropped to a fresh 24-year low of more than 137 against the dollar.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, Rebecca Feng at rebecca.feng@wsj.com and Pia Singh at Pia.Singh@wsj.com
Corrections & Amplifications
Beijing fined tech companies for failing to make proper antitrust declarations over the weekend. An earlier version of this article incorrectly said it happened on Monday. Also, China recorded more than 2,300 locally transmitted Covid-19 cases nationwide over the last seven days. An earlier version of this article incorrectly said the country reported 3,300 locally transmitted cases nationwide over the weekend. (Corrected on July 11)
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