The US market is starting the new week on the left, as China’s “battle” with the coronavirus pandemic has sparked fresh fears of a slowdown in global growth and as investors prepare for the start of the corporate earnings season to get a better insight into the effects of inflation on business activity.
On the board, the Dow Jones industrial average lost 135.05 points, or 0.43%, to 31,203.10, the S&P 500 fell 1.02% to 3,859.70, while the tech Nasdaq lost 2.10 % and stands at 11,391.36 units.
All three indexes managed to finish higher last week, the first of the second half, after a dramatic first half of the year, with the Dow Jones gaining 0.8%, the S&P 500 closing 1.9% higher and the tech Nasdaq to be the undisputed protagonist with weekly gains of 4.6%.
Today, however, fears about the outlook for the global economy have returned to the fore, mainly due to new restrictions to deal with the coronavirus pandemic imposed by China.
Beijing imposed strict restrictions on several cities across the country over the weekend in an attempt to deal with the emergence of Omicron’s highly contagious BA.5 substrain.
A development that brought back painful memories from the early months of the pandemic, as China accounts for more than a quarter of global production and any potential disruption to business activity could exacerbate the already significant problems facing global supply chains, likely leading to further skyrocketing the prices of goods and products, at a time when inflation does not say to subside.
Investors, meanwhile, await updates from the corporate front as the second-quarter US earnings season kicks off on Thursday – with JPMorgan leading the way for the banking industry – to see how much the effects of inflationary pressures.
“This is a very important season (not all are considered that important), as the collapse in stocks so far in 2022 is largely driven by margin compression rather than a real inability to turn a profit,” analysts at Deutsche Bank explained.
Through Friday, S&P 500 companies were expected to post a 5.7% year-over-year rise in earnings for the second quarter of the year, according to IBES data from Refinitiv, the smallest expansion since the fourth quarter of 2020, amid pandemic. However, expectations have been skewed by estimates of 239.1% annual growth in the energy sector. Excluding energy, earnings are expected to shrink 3%, according to the data. For the full year, corporate profitability is expected to rise 9.4%, but just 3.8% excluding energy.
In business, Twitter’s stock plunged by more than 7%, after Elon Musk’s decision to withdraw his proposal for the acquisition of the social network, with the company indicating that it will legally pursue the completion of the transaction.
Source: Capital
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
