Stocks Wobble Ahead of Big Week for Corporate Earnings
July 23 2018 - 10:26AM
Dow Jones News
By Ben St. Clair
-- Tariffs loom over strong earnings
-- Oil prices climb following Trump's tweet
-- U.S. stocks set for flat opening
Global stocks mainly edged lower Monday as concerns of tariffs
hitting the global economy weighed down positive U.S. earnings
results.
The Nasdaq Composite fell 23 points, or 0.3% to 7798 shortly
after the opening bell. The S&P 500 and Dow Jones Industrial
Average inched lower about 0.1% each.
More than one-third of S&P 500 companies report results this
week, and investors say they'll be watching for signs that tariffs
are impacting corporate decision making. Analysts will also be
parsing economic data. The gross domestic product report for the
second quarter and other barometers of the U.S. economy will also
be released.
Oil prices headed higher on Monday after President Donald Trump
tweeted a message to his Iranian counterpart warning that threats
against the U.S. would be met with consequences such as few in
history have suffered. Brent crude, the global benchmark, was up
0.9% at $73.74 a barrel.
Last week, Mr. Trump reiterated his threat to impose tariffs on
European autos despite opposition from U.S. lawmakers and domestic
and foreign auto makers. Trade is expected to be prominent on the
agenda when European Commission President Jean-Claude Juncker
visits the White House on Wednesday.
The Stoxx Europe 600 was down 0.2% Monday, led by a 0.8% decline
in the auto sector. Asian markets were mixed.
The "big three" U.S. auto makers -- Ford, General Motors and
Fiat Chrysler -- and tech giants Facebook, Amazon and Google parent
Alphabet are all set to report earnings this week.
Corporate earnings so far have come in above expectations, with
87% of companies posting stronger-than-expected profits and 77%
beating revenue expectations. Earnings are up 21% from the
year-earlier period, which would mark the second-highest growth
rate since the third quarter of 2010, according to FactSet.
"I would have expected better price reaction to" strong
corporate earnings, said Craig Callahan, president and founder of
ICON Advisers. Instead, trade uncertainty has left markets
"interrupted or disrupted by investors guessing about events," Mr.
Callahan said.
Markets have seesawed in recent months as investors reacted to
heightened trade rhetoric and the imposition of U.S. tariffs and
retaliatory measures from China and Europe.
The trade-related selloffs have been driven more by sentiment
than financials, said Patrick Spencer, Baird's vice chairman of
equities. Even though tariffs make up a fraction of world GDP, the
concern is that "companies will just stop spending because they
don't know what's going to happen," Mr. Spencer added.
Over the weekend, finance ministers and central bankers of the
G-20 countries ended their meeting with little progress on
resolving global trade tensions. U.S. Treasury Secretary Steven
Mnuchin said "it's definitely a realistic possibility" that Mr.
Trump would follow through with his threat to impose tariffs on
$500 billion of Chinese goods.
In Asia, the yen and Japanese financial stocks jumped, while
government bonds sold off after Reuters reported that officials at
the Bank of Japan, whose board meets next week, were debating how
to make its stimulus program more sustainable.
Japan's Nikkei fell 1.3%, as a jump in the yen helped push
currency-sensitive shares lower. The Japanese yen was up 0.3%
against the dollar with the WSJ Dollar Index, which measures the
U.S. currency against a basket of 16 others, down 0.1%.
Meanwhile, the Shanghai Composite Index rose 1.1% and Hong
Kong's Hang Seng edged up 0.1%.
White House comments on monetary policy sent the dollar and
government bond prices sliding on Friday. Treasury bond prices
remained under pressure on Monday.
Elsewhere, yields on 10-year U.S. Treasurys edged up Monday to
2.910%, according to Tradeweb, from 2.895% Friday afternoon. Bond
yields rise when prices fall.
Gunjan Banerji contributed to this article.
(END) Dow Jones Newswires
July 23, 2018 10:11 ET (14:11 GMT)
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