U.S. stock indexes fell on Tuesday, weighed down by a slew of dour earnings forecasts from companies such as Paypal and Apple supplier Skyworks, while investors focused on talks to resolve a debt-ceiling deadlock. Shares of PayPal Holdings dropped 10.6% and led declines on the benchmark S&P 500 index after the company cut its margin forecast. They were also among the top drags on the Nasdaq Composite index. The Associated Press has the story:
Stocks edge lower on Wall St. in quiet trading
Newslooks- NEW YORK (AP)
Stocks are slipping on Wall Street Tuesday following some mixed earnings reports. Several beaten-down banks are also dropping more after a brief respite from a brutal run.
The S&P 500 was 0.3% lower in early trading. The Dow Jones Industrial Average was up 25 points, or 0.1%, at 33,644, as of 9:58 a.m. Eastern time, while the Nasdaq composite was 0.4% lower.
Paypal Holdings fell 10.6% despite reporting better profit and revenue for the latest quarter than expected. Analysts pointed to its forecast for how much profit it expects to wring out of each $1 of revenue, which may have disappointed some investors.
Electric automaker Lucid Group dropped 8.4% after reporting a worse loss than expected for the latest quarter. Other EV stocks including Rivian and Nikola also sank.
Skyworks Solutions sank 6.5% after reporting profit for the first three months of the year that matched forecasts. The semiconductor company’s comments about weakness in demand from China for Android phones may have frightened investors.
On the winning side of Wall Street were DaVita and McKesson after each reported stronger profit than expected. DaVita jumped 13%, while McKesson climbed 8.4%.
So far this earnings reporting season, which is approaching its final stretch, the majority of companies have been topping forecasts for first-quarter results. That’s largely because expectations were set quite low due to a slowing economy and high interest rates. Companies in the S&P 500 are still on track to report a second straight quarter of weaker profits from year-earlier levels.
The better-than-feared results have given some support to Wall Street when many other worries are weighing on it.
Key among them is what will happen to the U.S. banking system, which is under stress following three big bank failures since March. Hurt by much higher interest rates, smaller and mid-sized banks are scrambling to reassure investors and customers that their deposits are stable and that they aren’t at risk of a sudden exodus of customers.
After finding some stability in the two prior days, stocks of regional banks under the heaviest scrutiny by Wall Street fell again Tuesday. PacWest Bancorp dropped 5.7%, and Western Alliance Bancorp fell 4.8%.
The next big milestone for the market will be Wednesday’s report on inflation at the consumer level. Inflation has come down from its peak last summer, but it’s remaining stubbornly high. That’s raised uncertainty about what the Federal Reserve’s next move will be.
The central bank has already yanked its benchmark interest rates to a range of 5% to 5.25%, up from from virtually zero early last year. High rates can smother inflation, but only by slowing the economy and hurting investment prices bluntly.
Many investors are preparing for a recession to hit later this year because of much higher rates, as well as the potential for banks to pull back on lending because of their industry’s troubles.
Looming over it all is a June 1 deadline. That’s when the U.S. government could potentially run out of cash to pay its bills unless Congress allows it to borrow more. The widespread expectation is that Congress will come to a deal before that deadline because the alternative would be widespread damage to the economy and financial markets.
But each day that passes without a deal raises concerns a bit more. President Joe Biden will meet with leaders from Congress after U.S. stock markets close for trading Tuesday.
Worries about weakening demand sent crude oil slipping. Stocks also dropped in Shanghai, down 2.1%, after a report showed that imports to China slumped sharply last month.
In the bond market, the 10-year Treasury yield was holding steady at 3.51%. The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.02% from 4.00% late Monday.
