Earnings thud may mark end of high times on Wall Street
The end may be nigh — at least on Wall Street.
Stocks experienced a sharp selloff on Tuesday as two drivers of the 9-year-old bull market — cheap money and strong earnings — both seemed on the verge of petering out.
The Dow Jones industrial average fell as much as 620 points during Tuesday trading after corporate giants like Caterpillar, 3M and Google reported first-quarter results that made investors uneasy — because they missed forecast profits or reported higher-than-expected cost increases.
At the same time, on Tuesday, the yield on the 10-year Treasury hit 3 percent for the first time since 2014.
By the end of the day, the Dow lost 424.56 points, to 24,024.13. Since Nov. 29 — over a period of almost five months since right after Thanksgiving Day — the Dow is flat.
The sell-off comes as Federal Reserve Chairman Jerome Powell is weighing how much the central bank should raise borrowing costs this year — which would likely slow the pace of the growing economy.
Some of the biggest investors are worried that the good times are over.
“The Fed is not going to bail out the market unless there’s a big problem,” Jeffrey Gundlach, chief investment officer at bond giant DoubleLine Capital, said during a conference in New York.
“I don’t think Jay Powell is going to do diddly unless there’s some serious damage,” Gundlach added.
While the 10-year bond yield slipped below 3 percent at the end of trading — to 2.9995 percent — the yield has hovered near the psychological inflection point for two months.
Higher rates presage higher borrowing costs for mortgages, credit cards, small businesses getting loans and even corporations looking to buy back stock.
The stock market damage came as corporate giants seemed to burst the markets’ confidence.
see also Stocks drop after Fed chairman signals more rate hikes US stocks extended losses and the S&P 500 hit a...
3M was the biggest loser for the blue-chip index, with shares falling more than 7 percent during intraday trading after the company slashed its full-year guidance.
Chief Executive Inge Thulin said on an analyst call that some markets were “softer than we anticipated going into the year.”
Caterpillar plunged more than 6 percent after its chief finance executive said during a conference call that the first quarter of 2018 “will be the high watermark for the year.”
“There has been this underlying fear — when is this going to end?” Kristina Hooper, chief global market strategist for Invesco, told The Post. “When Caterpillar essentially said ‘this is as good as it gets,’ that hit a nerve for investors.”
Tech giants Google and Facebook also dragged down markets.
Wall Street sold off Alphabet, Google’s parent company, after the search giant reported $7.7 billion in spending during the first three months of the year. The company’s shares slumped 4.5 percent, to $1,019.98.
And Facebook, which reports its earnings on Wednesday, was slammed by a report that Social Security numbers and other sensitive information have been sold on the company’s platform for years.