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Wall Street falls as earnings kicks into high gear


Traders work at the post where Carvana Co. is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

U.S. stock indexes fell on Tuesday after industry bellwethers 3M, Johnson & Johnson, and GE beat expectations for profit but warned of a challenging year ahead.

The fourth-quarter earnings season is keenly watched as companies are expected to feel the full impact of the Federal Reserve’s rate-hike campaign. The central bank is widely expected to raise rates by another quarter of a percentage point next week.

Industrial conglomerate 3M Co (MMM.N) fell 5.9%, leading the decliners among Dow components after reporting a fall in quarterly profit.

Verizon Communications Inc (VZ.N) dropped 0.4% after forecasting annual profit below estimates, while Johnson & Johnson (JNJ.N) fell 0.5% as it warned that its medical devices business would be hit in the first half of 2023 due to a surge in COVID-19 cases in China.

General Electric Co (GE.N) fell 1.1% on a disappointing profit forecast for the year, despite topping quarterly earnings estimates.

“The problem today is mainly earnings,” said Fall Ainina, research director at James Investments. “Now many are forecasting a profit recession, which is back-to-back quarters of negative earnings.”

Wall Street’s main indexes started the earnings- and data-heavy week on a strong note amid renewed appetite for growth stocks following a battering last year.

After logging its biggest gain in over two months on Monday, Advanced Micro Devices Inc (AMD.O) slipped 2.8% as Bernstein downgraded it to “market-perform” from “outperform”.

The Philadelphia SE Semiconductor index (.SOX) dropped 0.9%to slip from its one-month high.

Big Tech earnings could also determine whether renewed enthusiasm for growth stocks will be sustained.

“In the near-term, the answer seemingly lies with tech earnings … longer-term, if we do experience a Fed pivot this year, then would anticipate a strong, positive buying impulse for tech,” JPMorgan analysts wrote in a client note.

Microsoft Corp (MSFT.O) is scheduled to report quarterly earnings after the bell.

Analysts now see fourth-quarter earnings for S&P 500 companies dropping 2.9% year-on-year, nearly twice as much as the 1.6% annual drop seen at the beginning of the year, according to Refinitiv data.

At 10:20 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 107.64 points, or 0.32%, at 33,521.92, the S&P 500 (.SPX) was down 17.28 points, or 0.43%, at 4,002.53, and the Nasdaq Composite (.IXIC) was down 38.58 points, or 0.34%, at 11,325.83.

A slew of stocks was briefly halted for trading on the New York Stock Exchange shortly after the market opened on Tuesday.

Data showed U.S. business activity contracted for a seventh straight month in January, but business confidence strengthened as the new year began.

Other major growth stocks also dipped, with Alphabet Inc (GOOGL.O) falling 1.1%. The U.S. Justice Department is poised to sue Google as soon as Tuesday, according to a report, regarding its dominance over the digital advertising market.

Declining issues outnumbered advancers for a 1.75-to-1 ratio on the NYSE and for a 1.48-to-1 ratio on the Nasdaq.

The S&P index recorded 23 new 52-week highs and 10 new lows, while the Nasdaq recorded 28 new highs and 12 new lows.