U.S. stocks closed down on Monday after flip-flopping throughout afternoon trading, as investors contrasted Bank of America’s positive earnings with surging bond yields ahead of further earnings cues this week. Canada’s TSX ended with a modest 0.10% gain, aided by a rally in energy stocks as oil rose and natural gas prices in the U.S. surged to a 13-year high.
Market participants are bracing for a barrage of earnings that will help them assess the impact of the Ukraine war and a spike in inflation on company financials. Netflix, Tesla, Johnson & Johnson and International Business Machines are all to report this week.
Trading volumes were thin after the Easter break. With European markets also remaining shut on Monday, this listless trading contributed to the topsy-turvy session.
“The market is looking for some direction. Do we get it from earnings - maybe. But the overarching factors continue to be what does China look like with its zero-COVID policy, and what does the Fed look like going forward in terms of interest rates and inflation,” said Jack Janasiewicz, portfolio manager and lead portfolio strategist at Natixis Investment Managers.
“It’s going to be some time before either one gives us any clear direction. With that backdrop, I’m not shocked if we just continue to trade in a range.”
Bank of America rounded out earnings season for the big Wall Street banks, reporting strong growth in its consumer lending business, although its investment banking unit took a hit from a slowdown in deal making.
Its share price rose 3.4%, while the broader S&P 500 banks index also gained 1.7%.
Apple Inc slipped 0.1% as the benchmark 10-year Treasury yield climbed to 2.86%, after hitting 2.884% earlier on Monday, the highest since Dec. 2018.
Canadian government bond yields also edged higher across the curve. The 10-year touched its highest level since January 2014 at 2.800% before dipping to 2.784%, up nearly 1 basis points on the day.
Shares of market-leading technology and growth companies have come under pressure as expectations of a string of interest rate hikes threaten to erode their future earnings.
Tesla, however, rose 2% as it prepares to reopen its Shanghai plant following a near three-week COVID shutdown.
Five of the 11 major S&P sectors were higher, led by the energy index which advanced 1.5%. Crude prices gained and Brent topped US$114 a barrel at one point on outages in Libya deepening concerns over tight global supply.
Among the best performers was Marathon Petroleum Corp , which gained 3.3% to hit a second lifetime high in three sessions. Valero Energy Corp and Phillips 66 both advanced 5.2%.
The Dow Jones Industrial Average fell 39.54 points, or 0.11%, to 34,411.69, the S&P 500 lost 0.9 points, or 0.02%, to 4,391.69 and the Nasdaq Composite dropped 18.72 points, or 0.14%, to 13,332.36.
Charles Schwab Corp fell 9.4%, its biggest one-day drop since March 2020, after the financial services company missed quarterly profit estimates.
Twitter rose 7.5% as the micro blogging site adopted “poison pill” on Friday to restrict Tesla CEO Elon Musk from raising his stake to beyond 15% for a one-year period.
Didi Global Inc slumped 18.3% after the Chinese ride hailing company said it will hold an extraordinary general meeting on May 23 to vote on its delisting plans in the United States.
The S&P 500 posted 27 new 52-week highs and 24 new lows; the Nasdaq Composite recorded 59 new highs and 397 new lows. In New York, 10.35 billion shares changed hands, compared with the 11.79 billion average for the full session over the last 20 trading days.
The S&P/TSX Composite Index closed up 22.71 points to 21,878.41 and the energy sector rose nearly 3%. Brent crude, the global benchmark, rose $1.46, or 1.3%, to settle at $113.16 a barrel. West Texas Intermediate rose $1.26, or 1.2%, to settle at $108.21 a barrel.
U.S. natural gas futures jumped more than 10% to more than a 13-year-high, surging on the back of an unseasonable cold snap in the United States expected to bring snow and ice to northern states.
The unusual weather has boosted natural gas futures at a time when that market is generally shifting to moving gas into storage in preparation for the next winter. In addition, steady demand in Europe for liquefied natural gas has kept U.S. exports flowing at record levels.
Front-month gas futures gained 52 cents, or over 7%, to settle at $7.820 per million British thermal units, its highest close since October 2008. Last week, the contract rose by 16%, the biggest one-week gain since 2020.
The TSX materials sector, which includes precious and base metals miners and fertilizer companies, added 0.8% as gold prices jumped to a more than one-month high. Among the sectors that lost ground was healthcare. It shed 5.1% with pot producers, including Canopy Growth Corp, among the top decliners.
Reuters, Globe staff
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