US stocks continued a series of choppy trading Monday as Wall Street headed into its third-quarter earnings season and braced for a batch of inflation reports.
The S&P 500 (^GSPC) was down 0.6% after opening higher, while the Dow Jones Industrial Average (^DJI) was down 40 points, or 0.1%. The technology-heavy Nasdaq Composite Index (^IXIC) is down 1%.
The CBOE Volatility Index (^VIX), which measures the short-term outlook for market turmoil, approached the 33 level. Treasury yields extended their recent high. Oil fell after climbing 17% last week, the largest jump since Russia’s invasion of Ukraine.
The moves come after an erratic week that started with a sharp rally and ended with a sharp sell-off that erased many of the resulting gains. The recent slide was driven by a strong September jobs report that assured investors that Fed officials are unlikely to move away from restrictive monetary policy anytime soon.
The benchmark S&P 500 is down 23.6% year-to-date as of Friday’s close, but nine individual trading days include that full 32-point drop, according to Nicholas Colas of DataTrek Research.
He added that the largest share of the days of decline occurred around the Consumer Price Index (CPI) or Fed-related events, one of which was driven by tensions between Russia and Ukraine, and two came on the heels of poor corporate earnings releases. Next week, all these factors are expected to test the US stock market.
Investors are bracing for the bank earnings spree that usually marks the start of a new earnings reporting period, with all results due from JPMorgan (JPM), Citi (C), Wells Fargo (WFC) and Morgan Stanley (MS). . Other companies scheduled to report this week include PepsiCo (PEP) and Delta Air Lines (DAL).
Analysts are preparing for a painful earnings season as persistent inflation, rising interest rates and geopolitical headwinds weigh on corporate earnings.
“The bear market won’t end until the deteriorating fundamental picture is completely ruled out,” Mike Wilson, chief equity strategist at Morgan Stanley, said in a note.
Also appearing on the Wall Street panel is consumer price data for September, one of the most pivotal reports ahead of the Open Market Committee’s upcoming policy-setting meeting in November. While the headline reading is expected to dip again, all eyes will be on the “core” component of the report, which excludes volatile food and energy categories. Bloomberg’s core CPI rose to 6.5% from 6.3% during the year, according to the latest estimates.
“Volatility in the equity and fixed income markets will continue until there is a clear indication that inflation is under control,” Peter Essely, Head of Portfolio Management at Commonwealth Financial Network, said in a recent note.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed
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Originally published at San Jose News Bulletin
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