(Bloomberg) — U.S. equities turned sharply lower as megacap technology stocks including Apple Inc. and Microsoft Corp. tumbled ahead of their earnings reports due after the market close.
The tech-heavy Nasdaq 100 was headed toward its biggest one-day drop in more than two months as all three of the major American equity indexes fell from all-time highs. Tesla Inc. fell, while General Electric Co. rose after both reported results that beat analysts’ estimates. The Hang Seng Index sank the most since May 2020 as speculation swirled that U.S. funds are offloading China and Hong Kong assets.
The rout in China is adding to global market unease, with investors already concerned about the economic recovery, given the rise in the Covid-19 delta variant and central-bank talk of tightening policy. While a strong start to the earnings season has helped U.S. equities, further catalysts may come from this week’s Federal Reserve meeting and the updates due today from Apple, Microsoft and Alphabet Inc., which are among the top five heaviest-weighted stocks in the S&P 500. Shares of all three sank more than 1.5%.
“The turmoil in tech stocks in China is finally bleeding into U.S. tech stocks,” said Chris Murphy, Susquehanna International Group’s co-head of derivatives strategy. “We might also be seeing investors taking profits ahead of the big tech earnings later this week. I am concerned investors will lighten up in general after those earnings this week as we head into a seasonably weak period for equities.”
Forecasts indicate that S&P 500 earnings growth should set new highs during the second-quarter season, and so far more than 80% of the companies that have reported their results beat Wall Street’s sales and profit estimates. That’s helped to offset concern about inflation and the spread of Covid-19. At the same time, it has some investors thinking this might be as good as it’s going to get for a while.
“We probably are at peak earnings,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, said on Bloomberg TV. “They have easy comps so that’s helping. Plus they’ve been able to start putting through some of the price increases.”
In China, the yuan slid to its lowest since April against the dollar and bonds slumped, indicating mounting worries that Beijing’s crackdown on education, food delivery and property sectors could expand to other industries. While the Hang Seng Tech Index plunged, trading in Chinese education stocks listed in the U.S. showed some signs of the selloff easing.
Elsewhere in markets, Treasuries rose with the yen amid demand for haven assets. Bitcoin traded around $38,000 after briefly rising above $40,000 overnight.
Here are some key events to watch this week:
Alphabet, Apple, Facebook, Amazon report earnings this weekFederal Reserve policy meeting concludes WednesdayU.S. GDP data are due Thursday
Stocks
The S&P 500 fell 1% as of 12:07 p.m. New York timeThe Nasdaq 100 fell 2%The Dow Jones Industrial Average fell 0.6%The Stoxx Europe 600 fell 0.5%The MSCI World index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%The euro rose 0.3% to $1.1833The British pound rose 0.5% to $1.3885The Japanese yen rose 0.7% to 109.61 per dollar
Bonds
The yield on 10-year Treasuries declined five basis points to 1.24%Germany’s 10-year yield declined two basis points to -0.44%Britain’s 10-year yield declined one basis point to 0.56%
Commodities
West Texas Intermediate crude fell 0.5% to $71.54 a barrelGold futures were little changed
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