April 24 (Reuters) – The Nasdaq underperformed the S&P 500 and the Dow on Monday, pressured by high-profile megacaps as investors awaited results from companies including Microsoft while Tesla shares fell on concerns about its spending plans.
Tesla Inc (TSLA.O) slid 2% after the automaker raised its 2023 capital expenditure forecast to ramp up output, weighing down consumer discretionary stocks (.SPLRCD).
It was the second biggest drag on the benchmark S&P 500, behind Microsoft Corp (MSFT.O), which fell 1.6% ahead of its results due out on Tuesday. Also on deck this week are reports from Alphabet Inc (GOOGL.O), Amazon.com Inc (AMZN.O) and Meta Platforms Inc (META.O).
A rally in these stocks has supported Wall Street this year, so investors are worried about whether the gains can continue given the gloomy economic outlook.
“The fallout from Tesla is emanating and with Microsoft there’s elevated anxiety ahead of its earnings,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “How resilient has their growth been given the concerns about the enterprise spending in general.”
The Dow Jones Industrial Average (.DJI) rose 9.19 points, or 0.03%, to 33,818.15; the S&P 500 (.SPX) lost 3.4 points, or 0.08%, at 4,130.12; and the Nasdaq Composite (.IXIC) dropped 52.58 points, or 0.44%, to 12,019.88.
Among the S&P 500’s 11 major sectors, energy was the strongest, up 2%, while technology (.SPLRCT) was the weakest, down 0.7%.
Wedbush’s James pointed to underperformance in chip stocks, with the Philadelphia semiconductor index down 0.5%, potentially due to increasing global tensions with China.
U.S. stocks have largely held steady through the start of the earnings season on stronger-than-expected results from big banks, allaying concerns about a contagion from the regional banking crisis in March.
Of the 90 S&P 500 companies that have reported first-quarter results so far, nearly 77% have topped analysts’ estimates, as per Refinitiv IBES data. The long-term average beat rate stands at 66%.
Earnings forecasts have improved marginally, with analysts expecting a quarterly profit contraction of 4.7% versus a 5.1% decline estimated at the start of April.
Early readings of first-quarter U.S. GDP, personal consumer expenditure index (PCE) for March, and April consumer confidence are among the data scheduled for release this week.
Mixed data last week cemented bets of a 25-basis-point rate hike by the Federal Reserve in May, with money market traders pricing in a 92% chance of such a move, according to CME Group’s Fedwatch tool.
Most Fed policymakers over the past week acknowledged the central bank has more work to bring down inflation, before entering the blackout period until the next policy meeting.
U.S. Treasury yields eased following recent signs of slowing inflation and economic activity, though investors appeared increasingly concerned about a potential standoff over the U.S. debt ceiling.
U.S. House of Representatives Speaker Kevin McCarthy said the House would vote on his spending and debt bill this week amid lingering concerns that the U.S. government could hit its debt ceiling sooner than expected.
Among the market’s biggest drags on Monday was Amazon.com, down 0.8% and AT&T Inc (T.N), whose results disappointed when it reported on Thursday, and was down more than 3% on Monday.
Among penny-stock household names, Bed Bath & Beyond (BBBY.O) shares fell 34%, or 10 cents, to 19 cents after it declared bankruptcy on Sunday.
First Republic Bank (FRC.N) was up 8% ahead of its quarterly report. The regional bank’s shares have sunk 88% this year, triggered by the U.S. banking crisis.
Advancing issues outnumbered decliners on the NYSE by a 1.02-to-1 ratio; on Nasdaq, a 1.61-to-1 ratio favored decliners.
The S&P 500 posted 20 new 52-week highs and two new lows; the Nasdaq Composite recorded 59 new highs and 178 new lows.
Reporting by Sruthi Shankar in Bengaluru
Editing by Vinay Dwivedi
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