(Reuters) – U.S. stocks fell on Monday, coming off their worst five-day drop in seven months last week, as Apple led technology stocks lower and tensions between Western powers and Saudi Arabia added to already frayed investor nerves ahead of earnings.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 12, 2018. REUTERS/Brendan McDermid
Among the biggest drags on the three major indexes was Apple, which fell 1.9 percent after Goldman Sachs said there were multiple signs of rapidly slowing consumer demand in China, which could affect demand for iPhones this fall.
The technology index fell 1.2 percent, the most among the 11 S&P sectors. The gainers were led by the defensive real estate, utility and consumer staple companies, which were up between 0.46 and 0.79 percent.
As the earnings season shifts into high gear this week, Goldman’s warning on weak China demand only adds to fears about the impact of tariffs on corporate profits, even as borrowing costs are rising. These factors contributed to a brutal sell-off last week.
“It’s really just a continuation of what we have been experiencing in the first two weeks of the month and you are going to experience this for another week or two, probably until we are halfway through the earnings season,” said Tom Martin of Globalt Investments in Atlanta.
The first major earnings report this week was also not well received. Bank of America dropped 1.7 percent as its better-than-expected quarterly profit failed to overshadow disappointing loan growth.
Also adding to nerves was the rising tension between Western powers and Saudi Arabia over the disappearance of journalist Jamal Khashoggi. Saudi Arabia holds stakes in big U.S. companies and also finances SoftBank Group’s $100 billion Vision Fund, the world’s largest technology investment vehicle.
“Saudis have been fairly large investors in technology, one way or another, to the extent that if it sold out, that could weigh on the market,” said Martin.
At 12:21 p.m. ET the Dow Jones Industrial Average was down 50.98 points, or 0.20 percent, at 25,289.01, the S&P 500 was down 9.87 points, or 0.36 percent, at 2,757.26 and the Nasdaq Composite was down 55.33 points, or 0.74 percent, at 7,441.57.
Energy stocks fell 0.6 percent as oil prices inched lower on concerns over long-term demand outlook. Crude prices got some support, however, from worries about Saudi Arabia, the world’s top crude exporter. [O/R]
Profits at S&P companies are expected to have risen 21.6 percent, according to I/B/E/S data from Refinitiv, less than the growth in the past two quarters.
The top gainers on the S&P were L3 Technologies, which jumped 10.7 percent, and Harris Corp, which climbed 9.5 percent, after the military communication equipment providers announced an all-stock merger to create the sixth-largest U.S. defense contractor.
Advancing issues outnumbered decliners for a 1.34-to-1 ratio on the NYSE, but declining issues outnumbered advancers for a 1.08-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and six new lows, while the Nasdaq recorded 10 new highs and 117 new lows.
Reporting by Medha Singh in Bengaluru; Editing by Shounak Dasgupta