Nasdaq falls ahead of tech earning reports

The tech-heavy Nasdaq has slumped as nerves around Big Tech earnings this week added to worries over slowing global growth and a more hawkish Federal Reserve.

Market-leading growth stocks have been hammered this year as investors fear the impact of higher interest rates on their future earnings while China’s lockdown and hawkish pivot by major central banks have overshadowed what has been a better-than-expected earnings season so far.

Growth-oriented sectors such as technology, S&P 500 communication services and consumer discretionary fell nearly 2.0 per cent, leading losses among the 11 major S&P 500 sectors.

Alphabet Inc and Microsoft Corp fell 2.7 per cent and 2.2 per cent respectively ahead of their results after the closing bell on Tuesday.

They are among a third of the S&P 500 companies that are set to report results this week.

“Given the picture of the market (right now), if any of these tech companies report earnings that are below expectations, it could be very dangerous because the downside is fragile,” said Julius de Kempenaer, senior technical analyst at StockCharts.com.

“If they report numbers that are better than expected, I don’t think that will be enough to turn the current weakness in the market around.”

Although there were some earnings bright spots, the overall mood in the market was sombre due to global growth fears, stoked by China’s COVID-19 curbs, the Ukraine war and aggressive policy tightening by the Fed.

Russia accused NATO of creating a serious risk of nuclear war by arming Ukraine in a proxy battle as the US and its allies met to pledge the heavy weapons Ukraine needs to achieve victory.

Twitter fell 1.8 per cent, a day after the social media platform agreed to sell itself to Tesla Inc chief Elon Musk, while Tesla dropped 7.8 per cent.

In early trading, the Dow Jones Industrial Average was down 304.51 points, or 0.89 per cent, at 33,744.95, the S&P 500 was down 59.42 points, or 1.38 per cent, at 4,236.70, and the Nasdaq Composite was down 318.95 points, or 2.45 per cent, at 12,685.90.

Of the 134 companies in the S&P 500 that reported earnings so far, 80.6 per cent topped analysts’ profit expectations, according to Refinitiv data.

In a typical quarter, 66 per cent beat estimates.

United Parcel Service Inc slipped 3.6 per cent despite reporting a rise in quarterly adjusted profit while US hospital operator Universal Health Services Inc slumped 11.1 per cent after its earnings missed estimates.

General Electric Co fell 9.8 per cent after forecasting full-year earnings at the low end of its previous estimate.

Meanwhile, data showed US consumer confidence edged lower in April, though households planned to buy cars and many appliances, which should help underpin consumer spending in the second quarter.

Declining issues outnumbered advancers for a 2.91-to-1 ratio on the NYSE and a 3.32-to-1 ratio on the Nasdaq.

The S&P index recorded 1 new 52-week highs and 27 new lows while the Nasdaq recorded 17 new highs and 312 new lows.