Dow retreats 100 points as investors await a big week of earnings

Stocks slid Monday morning, after the major averages posted their best week in months amid a stronger-than-expected start to earnings season.

The Dow Jones Industrial Average shed 96 points, or 0.2%. The S&P 500 lost 0.01%, and the Nasdaq Composite gained 0.9%.

A few things dented sentiment on Monday. Overnight, China reported GDP that disappointed, coming in at 4.9% annual growth in the third quarter. That was short of the 5.3% growth expected by economists polled by Reuters. Industrial production in China last month also fell short of expectations.

U.S. industrial production declined in September too as supply constraints continued to hinder manufacturing. Output fell almost 1.28% to its lowest level since February, when it fell 3.02%, according to data released Monday by the Federal Reserve.

And the 10-year Treasury yield climbed back above 1.61% to start the week. Rising rates have caused some pressure in tech shares at times this year as investors rotate out of growth stocks and into more value-oriented names.

Disney shares lost more than 2% after Barclays downgraded the stock and predicted streaming subscriber growth will slow.

But the major averages are coming off a winning week due to strong earnings reports and results later this week could change the tone back to bullish if they follow the same trend. The Dow advanced 382 points Friday, ending the week with a 1.58% gain for its best week since June. The S&P 500 rose 1.82% last week for its best week since July, while the Nasdaq Composite saw its best week since the end of August, with the tech-heavy index adding 2.18%.

So far 41 S&P 500 components have reported third-quarter results, with 80% of them topping EPS expectations, according to data from FactSet. Taking into account the companies that have already reported and estimates for the rest, third-quarter profit growth will total 30%, the third highest quarterly growth rate for S&P 500 companies since 2010, according to FactSet.

In addition to better-than-expected earnings from Goldman Sachs on Friday, positive economic data also boosted stocks. Retail sales rose 0.7% in September, the Census Bureau said Friday, while economists surveyed by Dow Jones were expecting a decline of 0.2%.

“Wall Street was expecting a slowdown in spending, but it turns out the U.S. consumer is not to be messed with,” said Edward Moya, senior market analyst at Oanda. “Back-to-back months of better-than-expected retail sales data shows the consumer looks strong heading into the holiday season,” he added.

A number of big names are set to report in the week ahead week, including Netflix, Johnson & Johnson, United Airlines and Procter & Gamble on Tuesday. Tesla, Verizon and IBM are among the other names on deck for the week.

Strong results from the first week of earnings, including from the largest banks, have pushed the major averages to within striking distance of their all-time highs. The Dow is less than 1% from its record high, while the S&P 500 and Nasdaq Composite are 1.6% and 3.3% below their records respectively.

As earnings season gets into full swing, investors will be watching for company commentary around supply chain bottlenecks and inflation, among other things.

“Growth in 2022 seems likely to be lifted by the lagged impacts of monetary stimulus, the lagged impacts of surging Consumer Net Worth, reopening, and inventory rebuilding,” Ed Hyman, Evercore ISI Chairman, wrote in a note to clients Sunday. “Supply chain problems are likely to ease, and unfilled demand from this year is likely to be met next year. Wages are likely to increase, lifting consumer incomes.”

Bitcoin pulled back from its recent high, but held above $60,000 on Sunday, according to data from Coin Metrics, as the first bitcoin futures exchanged-traded fund gets set to begin trading this week.

Bitcoin moved higher on Friday in anticipation that such a listing could come. The world’s largest cryptocurrency topped $60,000 last week for the first time since April, trading as high as $62,307.