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Frankfurt - US stocks slipped, with the Standard & Poor’s 500 Index continuing to retreat from a four-month high, before central bank meetings this week in the US and Japan and as investors awaited earnings reports to gauge corporate health.
The S&P 500 fell 0.4% to 2 082.65 at 15:50, after reaching the highest since December 1 last Wednesday. The Dow Jones Industrial Average lost 91.22 points to 17 912.53. The Nasdaq 100 Stock Index slipped 0.3% after its steepest drop in two weeks on Friday following disappointing results from Microsoft and Alphabet.
“The market is at an important juncture - this is the third time in the last 15 to 18 months that we’ve been near record levels in major indexes,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC. “Earnings are going to be the big focus this week. Nobody’s really looking for anything surprising out of the Fed. People will be closely watching the BOJ meeting on Thursday.”
More than a third of the companies in the equity benchmark report results this week, including Apple, Amazon.com and Boeing. Investors will be on the lookout for shifts in rate guidance after the Federal Reserve’s meeting Wednesday, while most economists predict monetary stimulus will be stepped up by the Bank of Japan (BoJ).
Equities have lost momentum in the prior three sessions as corporate results failed to provide fresh impetus for investors to send the S&P 500 higher after it reached a four-month high. The benchmark rallied as much as 15% from a 22-month low in February, boosted by a recovery in oil prices and signs of improvement in China.
The gauge last week briefly climbed within 1% of a record set in May, before closing on Friday 1.8% away from that level.
Still, analysts have lowered first-quarter earnings estimates since the start of the year, when they forecast flat growth for S&P 500 companies. They now call for a profit decline of 9.2%. More than 130 companies have reported results so far, of which 81% beat earnings projections and 60% topped sales predictions.
Investors are also scrutinizing economic data to discern the strength of US growth and the outlook for rates. A report on new home sales is due later today. Traders are pricing in zero chance the Fed will raise rates at its meeting on Wednesday, with December now the first month with at least even odds for a boost.
“Going through the earnings season could pose downside risks depending on how results play out,” said Nick Ford, a fund manager who helps oversee the equivalent of $3.9bn at Miton Group in London.
“Markets are still adjusting to news from Friday, with earnings not feeling quite as safe as we had previously assumed. The Fed has gone out of its way to support markets. This week’s meeting should be pretty uneventful.”
