Dow falls over 400 points, dragged down by earnings, rising bond yields

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,
-1.46%
fell 56 points, or 1.3%, to 4,022.
The Dow Jones Industrial Average
DJIA,
-1.44%
fell 486 points, or 1.4%, to 33,339.
The Nasdaq Composite
COMP,
-1.79%
lost 205 points, or 1.7%, to 11,582.

The Dow
DJIA,
-1.44%
rose Friday, but logged a 3rd straight weekly decline, while the S&P 500
SPX,
-1.46%
saw a 0.3% weekly fall, its second straight decline. The Nasdaq Composite
COMP,
-1.79%
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 so they were becoming increasingly risk-off because the trading day continued.

The landscape included benchmark bond yields near their highs of the yr on expectations recent robust economic data will encourage the Federal Reserve to maintain borrowing costs higher for longer.

Minutes of the Fed’s Jan. 31-Feb. 1 meeting will probably 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.

“Thus far, dangerous assets have digested the rates repricing well — while the broad ‘risk-on’ rally has slowed to a crawl, the upper terminal rates haven’t moved through assets like a wrecking ball as some had assumed,” said Stephen Innes, managing partner at SPI Asset Management.

“But there stays a heightened degree of caution as a result of the steep rise in U.S. yields and rate volatility, an environment where the U.S. dollar tends to learn,” Innes added.

On Tuesday, yields for the 2-year Treasury note
TMUBMUSD02Y,
4.707%
were coming near the best point in 15 years, rising by 4.3 basis points to 4.673%.

Read also: Investors have pushed stocks into the death zone, warns Morgan Stanley’s Mike Wilson

Such caution was matched by Jonathan Krinsky, chief technical strategist at BTIG, who noticed that the newest rally had nevertheless begun to fade.

“After a number of weeks of chopping around, the SPX looks to have broken its short-term uptrend just as momentum has begun to roll over, much like 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 commonly one in every 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 response to rates has not been atypical over the past 18-months, as each of the prior six tactical peaks all occurred one to 4 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 within the prior month. The U.S. manufacturing PMI climbed to the four-month high of 47.8, up from 46.9.

While each are increases, any number below 50 points to a potentially shrinking economy.

Existing-home sales dropped to the bottom point in a decade, Tuesday data showed. January’s 0.7% decline is the twelfth straight monthly decline, in accordance with the National Association of Realtors figures.

Corporations in focus

Walmart Inc.
WMT,
+0.59%
shares were up greater than 0.5% after the retail giant reported its fourth-quarter earnings and offered its forward guidance. The corporate beat estimates on earnings and sales, but in addition offered guidance on the primary quarter and the total fiscal yr 2024 that fell in need of expectations.
Home Depot Inc.
HD,
-5.33%
shares were trading greater than 4.5% lower after fourth-quarter results from the house improvement chain. While posting a beat on profit throughout the quarter, sales missed expectations and the corporate’s downbeat forward guidance cited continuing challenges with inflation, labor markets and provide chains.
Shares of Meta Platforms Inc.
META,
+0.81%
rose greater than 1% after the parent company of Facebook and Instagram said it’s testing a paid subscription tier to confirm accounts.
Shares of the medical device maker, Medtronic PLC
MDT,
+0.58%,
are trading almost 0.5% higher after earnings results for its fiscal third quarter. Sales and adjusted earnings-per share beat estimates and the corporate modified its fourth-quarter guidance on earnings per share to $5.28 to $5.30, versus prior guidance of $5.25 to $5.30.