Major U.S. stock indexes sank on Monday, weighed down by declines in technology and other megacap shares, as investors looked toward a major week of events including central bank meetings and a slew of earnings reports. The TSX lost ground, but with tech being less heavily weighted in Canada, losses were more modest.
The U.S. tech sector dropped 1.9% while energy shed 2.3%, the biggest drop among the S&P 500 sectors. Shares of Apple Inc, Amazon.com Inc and Google parent Alphabet Inc, which are due to post results later this week, all slumped.
More than 100 S&P 500 companies are expected to report results this week, which also includes central bank meetings in the United States and Europe and closely watched U.S. employment data.
“The market has had a big run and the trading is a bit more cautious heading into a week which likely will be an inflection point for the overall market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services.
The U.S. central bank is seen hiking the Fed funds rate by 25 basis points at the end of its two-day policy meeting on Wednesday, following a 2022 in which the Fed aggressively boosted rates to control soaring inflation.
Fed Chair Jerome Powell’s news conference will be scrutinized for whether the rate-hiking cycle may be coming to a close and for signs of how long rates could stay elevated.
“It’s probably one of the most important meetings since the whole thing began,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. “Unless the Fed extends that timeline meaningfully from what the market expects, which is that the Fed will be done in the next meeting or two, this may end up marking the pause, so to speak.”
Meanwhile, the European Central Bank is expected to deliver another large rate hike on Thursday.
Investors are also focused on earnings reports, amid concerns the economy may be facing a recession. With more than 140 companies having reported so far, S&P 500 earnings are expected to have fallen 3% in the fourth quarter compared with the prior-year period, according to Refinitiv IBES.
The Dow Jones Industrial Average fell 260.99 points, or 0.77%, to 33,717.09, the S&P 500 lost 52.79 points, or 1.30%, to 4,017.77 and the Nasdaq Composite dropped 227.90 points, or 1.96%, to 11,393.81.
U.S. Treasury yields rose, providing another pressure point for tech shares that have otherwise rebounded to start the year after a rough 2022. The 10-year yield was up for a third consecutive session, rising to 3.544% from 3.518% late on Friday.
Despite Monday’s declines, the S&P 500 remained on track to post its biggest January gain since 2019.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 142.37 points, or 0.7%, at 20,572.11, its biggest decline since the start of the year. On Friday, the index posted its highest closing level since June 8.
The TSX energy sector lost 2.2% as oil settled 2.2% lower at $77.90 a barrel.
Technology was down 2.2% in Toronto, while the materials group, which includes precious and base metals miners and fertilizer companies, fell 0.9% as gold and copper prices weakened.
Janus Henderson Investors became the second investor in Canada’s Ritchie Bros Auctioneers to publicly come out against the company’s planned acquisition of IAA Inc. Ritchie Bros shares advanced 1.3%.
Fairfax Financial Holdings was also a bright spot, climbing 2.8% after BMO raised the insurer’s rating to “outperform” from “market perform”.
In company news south of the border, shares of Johnson & Johnson fell 3.7% after the healthcare giant’s strategy to use bankruptcy to resolve the multibillion-dollar litigation over claims its talc products cause cancer was rejected by a federal appeals court.
Declining issues outnumbered advancing ones on the NYSE by a 2.40-to-1 ratio; on Nasdaq, a 2.08-to-1 ratio favored decliners. The S&P 500 posted 5 new 52-week highs and no new lows; the Nasdaq Composite recorded 67 new highs and 20 new lows. About 10.6 billion shares changed hands in U.S. exchanges, compared with the 11.2 billion daily average over the last 20 sessions.
Reuters, Globe staff
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