US Markets Slip Into Reverse Ahead Of Earnings, Data

US stocks lost ground on Monday as a lack of news to drive the market left participants warily embarking on a week back-end loaded with crucial economic data and the unofficial beginning to second-quarter earnings season.

The S&P 500 lost 1.2 percent to 3,854, the Nasdaq Composite lost 2.3 percent to 11,372. The Dow Jones Industrial Average fell 0.5 percent to 31,173. Market leading growth stocks pulled all three major US stock indexes into negative territory, with risk-off sentiment exacerbated by Macau's first casino shutdown in over two years to curb the spread of Covid-19.

"It’s a nervous market," said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle. "It’s all about the kick-off to earnings season and what inflation (data) tells us tomorrow."

"We know inflation is being driven by supply constraints, and China is an important factor," Haworth added. "And (the Macao shutdown) threw a cold blanket on the market this morning."

Results from big banks, including JPMorgan Chase, Citigroup, and Wells Fargo, are expected to launch the second-quarter reporting season later this week.

Analysts expect steep plunges of year-on-year profits as the companies grow their loan loss reserves, fueling fears of impending recession.

Later in the week a raft of economic data - including consumer prices, retail sales and factory output - should provide a glimpse of the extent to which inflation has peaked and the economy has cooled down as the Federal Reserve moves closer to next week's policy meeting, which is expected to culminate in the second straight 75 basis point interest rate hike.

"The market is trying to caution itself ahead of that (CPI) print," Haworth said. "We’re hoping for a slowdown, which would put the Federal Reserve in a softer stance, but on the other hand, there are lots of reasons to believe inflation could stay high and the Fed will remain aggressive."

The market currently expects that the central bank will raise the Fed funds futures rate by 75 basis points in its latest salvo against red-hot inflation, a tactic which some fear could tip an already cooling economy into recession.

Before big banks launch second quarter earnings season in earnest on Thursday and Friday, PepsiCo and Delta Air Line results are expected Tuesday and Wednesday, respectively.

Twitter tumbled after Elon Musk said he was terminating his deal to buy the social media company.

Shares of US casino operators Las Vegas Sands, Wynn Resorts and Melco Resorts plunged after Macau shuttered all casinos to contain its worst Covid outbreak since the health crisis began. (Reuters)