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S&P 500 Loses 1%, Nasdaq Breaks 5-Day Win Streak

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On Monday, U.S. equity markets closed down as Wall Street readied itself for the earnings reports of major corporations, which are scheduled to be released later in the week. These reports could indicate how the effects of inflation are being felt by businesses. The Dow Jones Industrial Average ended the day at 31,173.84, down 164.31 points, or 0.52 percent, from its previous level. The S&P 500 ended the day at 3,854.43, down 1.15 percent, while the Nasdaq Composite ended the day at 11,372.60, down 2.26 percent.

Tim Lesko, an advisor with Mariner Wealth Advisors, was quoted as saying, “It’s always about earnings. The expectation has been for a year now that it’s not about the trailing earnings, it’s about the future economic expectations. It really hasn’t mattered what people have reported in the way of revenue earnings. It’s been the talk that they’ve had about how they expect their future business to look.”

As a result of rising costs, slowing growth, and an active Federal Reserve, Jack Ablin, founding partner of Cresset Capital, anticipates that businesses will moderate their projections in the near future.

PepsiCo and Delta Air Lines will be the first companies to report their earnings for the season on Tuesday and Wednesday, respectively. Later in the week, bank stocks JPMorgan Chase, Morgan Stanley, Wells Fargo, and Citigroup will do the same.

Casino stocks Wynn Resorts and Las Vegas Sands led Monday’s losses, falling more than 6 percent each on the back of worsening COVID trends in China, including a week-long shutdown of casinos in Macau. This was the case despite the fact that Wynn Resorts and Las Vegas Sands were tied for the lead position on Friday. Additionally, Shanghai found its very first patient with the BA.5 subvariant.

Adam Crisafulli of Vital Knowledge noted that “COVID headwinds aren’t just a Chinese phenomenon”; rather, cases are growing globally, despite the fact that the probability of lockdowns in the United States and the European Union remains relatively low.

Nearly 2.8 percent of the S&P 500’s decline was attributable to the consumer discretionary sector, while 1.4 percent was attributable to the information technology sector. Amazon and Alphabet both experienced losses of more than 3 percent. The decline for Tesla was over 6.5 percent, while the decline for Netflix was about 5.2 percent. The Dow Jones Industrial Average fell as a result of declines of more than 2 percent in Nike, Caterpillar, and Walt Disney.

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Following Elon Musk’s decision to pull out of a purchase agreement with Twitter valued at $44 billion, shares of the social media business plummeted by 11.3%. The billionaire took issue with the number of bots and false accounts on the network and claimed that Twitter was not being transparent about the amount of actual activity that occurred on the platform. However, the corporation stated that it provided Musk with all of the necessary information for him to evaluate the claims.

In the meantime, the yield on the 2-year Treasury note lingered above its equivalent on the 10-year note, which is an inversion that many people consider as a recession predictor. On Monday, the rate for two years was trading at 3.07 percent, while the rate for ten years was trading at 2.99 percent.

Following a mixed session on Friday, which saw the Dow and S&P 500 dip marginally, while the Nasdaq Composite soared for the sixth day in a row, the markets moved in a variety of directions on Monday. Following the release of jobs data on Friday that was better than expected, which suggested that the economic slump that had been troubling investors had not yet arrived and added to bullish sentiment, all of the major averages finished the week with gains.

The employment report, despite being positive for the economy, may give the Federal Reserve the confidence it needs to maintain its aggressive rate hikes in the months to come in order to combat stubbornly rising inflation.

Despite this, there are many who anticipate even more suffering for the markets.

According to Adam Sarhan, founder and CEO of 50 Park Investments, “We’re in a bear market for stocks, and in a bear market surprises happen to the downside and not the upside,” said Adam Sarhan, founder and CEO at 50 Park Investments. “The trend is still down until we see higher highs and higher lows.”

Additionally, investors are looking forward to the release of the consumer price index for the month of June on Wednesday. According to projections provided by Dow Jones, it is anticipated that it would show headline inflation, which includes food and energy prices, increasing over May’s figure of 8.6 percent to 8.8 percent.

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