U.S. stocks opened lower Tuesday and sank deeper into negative territory, as investors weighed downbeat guidance from major retailers, rising bond yields and economic data that points at a slowdown ahead — all with the backdrop of geopolitical tensions.
How stocks are trading
- The S&P 500 index SPX, -1.55% fell 56 points, or 1.3%, to 4,022.
- The Dow Jones Industrial Average DJIA, -1.52% fell 486 points, or 1.4%, to 33,339.
- The Nasdaq Composite COMP, -1.91% lost 205 points, or 1.7%, to 11,582.
The Dow DJIA, -1.52% rose Friday, but logged a third straight weekly decline, while the S&P 500 SPX, -1.55% saw a 0.3% weekly fall, its second straight decline. The Nasdaq Composite COMP, -1.91% rose 0.6% last week. U.S. markets were closed Monday for the Presidents Day holiday.
What’s driving markets
Investors returned from the long weekend in a downbeat mood, and they were becoming increasingly risk-off as the trading day continued.
The landscape included benchmark bond yields near their highs of the year on expectations recent robust economic data will encourage the Federal Reserve to keep borrowing costs higher for longer.
Minutes of the Fed’s Jan. 31-Feb. 1 meeting will be published on Wednesday.
Tensions over Russia’s invasion of Ukraine, as President Joe Biden visits Poland and a Chinese delegation goes to Moscow, added to the anxiety.
“So far, risky assets have digested the rates repricing well — while the broad ‘risk-on’ rally has slowed to a crawl, the higher terminal rates have not moved through assets like a wrecking ball as some had assumed,” said Stephen Innes, managing partner at SPI Asset Management.
“But there remains a heightened degree of caution due to the steep rise in U.S. yields and rate volatility, an environment where the U.S. dollar tends to benefit,” Innes added.
On Tuesday, yields for the 2-year Treasury note TMUBMUSD02Y, 4.703% were coming close to the highest point in 15 years, rising by 4.3 basis points to 4.673%.
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Such caution was matched by Jonathan Krinsky, chief technical strategist at BTIG, who noticed that the latest rally had nevertheless begun to fade.
“After a few weeks of chopping around, the SPX looks to have broken its short-term uptrend just as momentum has begun to roll over, similar to breaks we saw in April, August, and December of 2022,” Krinsky wrote in a note to clients.
Source: BTIG
“As a reminder, the back half of February is often one of the weaker parts of the calendar. This has come on the heels of rates which have been moving higher for the last couple of weeks. A slow equity reaction to rates has not been atypical over the last 18-months, as each of the prior six tactical peaks all occurred one to four weeks after the low in rates,” he added.
U.S. economic updates on Tuesday include the S&P flash services, which rose to a 8-month high in February, at 50.5 up from 46.8 in the prior month. The U.S. manufacturing PMI climbed to the four-month high of 47.8, up from 46.9.
While both are increases, any number below 50 points to a potentially shrinking economy.
Existing-home sales dropped to the lowest point in a decade, Tuesday data showed. January’s 0.7% decline is the 12th straight monthly decline, according to the National Association of Realtors figures.
Companies in focus
- Walmart Inc. WMT, +0.75% shares were up more than 0.5% after the retail giant reported its fourth-quarter earnings and offered its forward guidance. The company beat estimates on earnings and sales, but also offered guidance on the first quarter and the full fiscal year 2024 that fell short of expectations.
- Home Depot Inc. HD, -5.56% shares were trading more than 4.5% lower after fourth-quarter results from the home improvement chain. While posting a beat on profit during the quarter, sales missed expectations and the company’s downbeat forward guidance cited continuing challenges with inflation, labor markets and supply chains.
- Shares of Meta Platforms Inc. META, +0.51% rose more than 1% after the parent company of Facebook and Instagram said it is testing a paid subscription tier to verify accounts.
- Shares of the medical device maker, Medtronic PLC MDT, +0.91%, are trading almost 0.5% higher after earnings results for its fiscal third quarter. Sales and adjusted earnings-per share beat estimates and the company changed its fourth-quarter guidance on earnings per share to $ 5.28 to $ 5.30, versus prior guidance of $ 5.25 to $ 5.30.
Movers & Shakers: Home Depot and Walmart slip after earnings guidance; Facebook parent Meta rises on trial of subscription tier