Wall Street ended lower on Monday after bank stocks erased earlier gains and Apple shares fell on a report saying the company plans to slow hiring and spending growth next year. But the Canadian benchmark stock index closed higher, retaining much of its strength from earlier in the day, as energy stocks rallied and U.S. crude prices rose back above US$100 a barrel.
Apple shares reversed course to close down 2.1% at $147.1 on a Bloomberg report that said the company plans to slow hiring and spending growth next year in some units to cope with a potential economic downturn. The potential move would see Apple - the world’s most valuable company - join a growing pool of American corporations including Meta Platforms and Tesla Inc in slowing hiring.
Goldman Sachs closed up 2.5% as it reported a smaller-than-expected 48% slump in second-quarter profit, helped by strength in its fixed-income trading. But the S&P financial sector overall weakened into the close.
“It’s really hard to sustain upward momentum,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “And that’s kind of the story of bear markets.”
The afternoon reversal is the latest bout of volatile trading for the market, which has been lurching mostly lower for weeks on worries that the Federal Reserve and other central banks around the world will slam the brake too hard on the economy in hopes of bringing down high inflation.
Underscoring worries about a recession have been recent reports showing slowdowns in parts of the economy because of the Fed’s rate hikes.
The housing market in particular has felt the effect of more expensive mortgage rates. A measure of sentiment among U.S. home builders released Monday weakened more than economists expected and sank to its lowest level in more than two years.
Still, some on Wall Street are seeing signs for at least temporary optimism. Oil prices have come off their highs, though U.S. crude rose 5.1% Monday thanks in part to the U.S. dollar weakening. A key report released last week also indicated expectations are easing for inflation among households. That could prevent a more vicious cycle from taking root and ease the pressure on the Federal Reserve.
Expectations have come down for how aggressively the Federal Reserve will raise interest rates at its meeting next week. Traders are now betting on a roughly one-in-three chance for a monster hike of a full percentage point, with the majority favoring a 0.75 percentage point increase. As recently as Thursday, the heavy bet was on a hike of a full point.
Across the Atlantic Ocean later this week, investors expect the European Central Bank on Thursday to raise interest rates for the first time in 11 years to combat inflation. Many investors expect an increase of 0.25 percentage points, “but more is not unthinkable,” economists wrote in a BofA Global Research report.
Interest rates are one of the two main levers that set prices for stocks. The other is corporate profits, which are under threat given high inflation and slowdowns in parts of the economy. For the moment, at least, analysts are still forecasting continued growth.
Earnings season kicked off last week, and U.S. banks have dominated the early part of the schedule for reporting how much they earned from April through June. Earnings from big technology companies next week will be closely watched, after their shares came under immense selling pressure through much of this year.
The earnings season in Canada gets into high gear next week as well, when the Canadian rails - among other stocks - report second-quarter results.
The S&P/TSX Composite Index closed up 201.17 points on Monday, or 1.09%, at 18,595.62. The energy sector gained 3.5%. Suncor Energy gained 1% after appointing three new directors in a corporate shakeup triggered by U.S. activist hedge fund Elliott Investment Management Inc.
TSX financials and materials sector both rose about 1%.
The Dow Jones Industrial Average fell 215.65 points, or 0.69%, to 31,072.61, the S&P 500 lost 32.31 points, or 0.84%, to 3,830.85 and the Nasdaq Composite dropped 92.37 points, or 0.81%, to 11,360.05.
Nine of the 11 major sectors of the S&P 500 lost ground, with healthcare and utilities suffering the largest percentage drop, while energy took the biggest gain.
Volume on U.S. exchanges was 10.63 billion shares, compared with the 12.15 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 1.20-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored decliners. The S&P 500 posted one new 52-week high and 31 new lows; the Nasdaq Composite recorded 30 new highs and 78 new lows.
In markets overseas, Hong Kong’s Hang Seng index surged 2.7% after Chinese media reported that some stalled real estate projects had resumed construction after buyers threatened to stop their mortgage payments. Stocks in Shanghai added 1.6%.
Stocks also rose across much of the rest of Asia and Europe, with Germany’s DAX returning 0.7%.
In the bond market, the yield on the U.S. 10-year Treasury rose to 2.98% from 2.96% late Friday. The two-year yield, which rose to 3.17%, is still above the 10-year yield. Some investors see that as an ominous sign that could presage a recession in a year or two.
Reuters, The Associated Press, Globe staff
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.