U.S. stock futures fell on Monday, pointing to a continuation of an April market sell-off that’s pushed the Dow Jones Industrial average lower for four-straight weeks.
Fear about a Covid breakout in China was the latest catalyst with Asian stock markets cratering on fears about a slowdown in the region because of lockdowns. Oil prices declined and yields retreated on the fears.
Wall Street is also bracing for a stacked week of earnings, including reports from major tech companies such as Amazon and Apple.
Dow futures lost 302 points, or 0.9%. S&P 500 futures dipped 1%, and Nasdaq 100 futures declined 0.9%.
The Dow posted its worst one-day performance since October 2020 on Friday, dropping more than 900 points and pushing the average to its fourth straight weekly loss. For the week, the S&P 500 and the Nasdaq dropped 2.8% and 3.8% respectively, posting their third straight weekly declines.
“Stocks are kicking off the week deeply in the red as all the anxiety and negativity from Thurs/Fri carried over the weekend,” wrote Adam Crisafulli of Vital Knowledge in a note to clients. “The dramatic shift in ECB/FOMC tightening expectations last week remains a huge overhang, but China is quickly rising the top of the list of market fears as COVID shutdown concerns spread to Beijing.”
After a late March comeback, stocks returned to their losing ways in April. The Nasdaq Composite is down nearly 10% for the month while the S&P 500 and Dow are off by 5.7% and 2.5% respectively. The S&P 500 is back in correction territory, down 11% from its high. The Nasdaq is off by more than 20% from its record.
About 160 companies in the S&P 500 are expected to report earnings this week, and all eyes will be on reports from big tech companies, including Amazon, Apple, Google-parent Alphabet, Meta Platforms and Microsoft.
Coca-Cola is expected to report before the bell on Monday. Other companies reporting on Monday include Whirlpool and Zions Bancorp.
Investors will be watching Twitter as well, which reportedly is re-examining Elon Musk’s takeover bid after the billionaire investor disclosed he secured $46.5 billion in financing, according to a Wall Street Journal report, citing unnamed sources. Twitter shares were higher by 0.9% in the premarket.
China’s Shanghai composite dropped more than 5% on Monday as China struggles to contain a Covid breakout in Shanghai. Beijing reported a spike in cases over the weekend.
WTI Crude oil fell 4% to back below $100 on fears of a global slowdown. The 10-year Treasury yield, which has undergone a rapid rise this year that has worried investors, dropped 9 basis points to 2.82% (1 basis point equals 0.01%).
Energy and commodity-related stocks dropped in premarket trading as oil prices pulled back.
“There has been severe damage in many areas of the market, while money rotated into perceived ‘defensives’ like utilities, staples, pharma, and even mega-cap growth,” said Jonathan Krinsky, chief market technician at BTIG. “Those areas, despite their strong momentum, are now unwinding lower, while the low-momentum names continue to trend down.”
