Market Decline Driven by Weak Economic Data and Corporate Earnings
The S&P 500 Index ($SPX) (SPY) fell by -1.80% today, while the Dow Jones Industrial Index ($DOWI) (DIA) dropped -1.37%. The Nasdaq 100 Index ($IUXX) (QQQ) experienced a decline of -2.26%. June E-mini S&P futures (ESM25) are down -1.93%, and June E-mini Nasdaq futures (NQM25) fell -2.36%.
Sharp Declines in Stock Indexes
Corporate and economic news contributed to significant losses across stock indexes today. Super Micro Computer saw its shares plummet over -17% after its preliminary Q3 results fell short of expectations. In a similar vein, Norwegian Cruise Line Holdings dropped more than -11% after reporting a “softening” in its 12-month forward bookings.
The decline was exacerbated by concerns over stagflation after the U.S. economy’s Q1 contraction marked the most significant drop in three years. Additionally, the Q1 core PCE price index surpassed predictions, raising further alarms. Labor market indicators worsened as the April ADP employment change revealed that employers added fewer jobs than anticipated. Markets are now looking ahead to earnings reports from Microsoft and Meta Platforms, which are scheduled to be released later today.
Global Economic Concerns
Thin manufacturing activity reports from China have cast a shadow over global growth forecasts. The April manufacturing PMI in China fell by -1.5 to 49.0, below the anticipated 49.7, marking the steepest contraction in 16 months.
The Treasury Department plans to sell $125 billion in T-notes and T-bonds next week, aligning with market expectations. Meanwhile, U.S. mortgage applications fell by -4.2% for the week ending April 25, with the purchase mortgage index down -4.4% and refinancing down -3.7%. The average 30-year fixed mortgage rate slightly declined to 6.89% from 6.90% in the previous week.
Macroeconomic Indicators
The April ADP employment change rose by +62,000, below expectations of +115,000, marking the slowest growth in nine months. The U.S. Q1 GDP contracted by -0.3% (quarter-over-quarter annualized), again weaker than the predicted -0.2%. The Q1 core PCE price index increased by +3.5% quarter-over-quarter, which exceeded the expected +3.1% increase. The Q1 employment cost index rose by +0.9%, aligning with forecasts.
In the coming week, attention will be on U.S. tariffs and trade negotiations. Key economic reports include March personal spending, which is expected to rise +0.6% month-over-month, and personal income, forecasted at +0.4%. Microsoft and Meta Platforms will report earnings after market close. On Thursday, the April ISM manufacturing index is expected to decrease by -1.0 to 48.0, with earnings reports from Amazon.com and Apple. Friday will see the release of April nonfarm payrolls, anticipated to rise by +130,000, and an unemployment rate expected to remain at 4.2%. April average hourly earnings are predicted to grow by +0.3% month-over-month and +3.9% year-over-year.
There is a 9% chance the markets are pricing in a -25 basis point rate cut following the May 6-7 FOMC meeting.
Q1 Earnings Season Insights
Q1 earnings reports are underway, and according to Bloomberg Intelligence, the consensus for year-over-year earnings growth for S&P 500 companies is +6.7%, a decline from an earlier expectation of +11.1% in November. So far, over a third of S&P 500 companies have reported, with 75% surpassing estimates. Projections for corporate profits in 2025 have been adjusted to an expected increase of +9.4%, down from +12.5% in January.
Global Market Highlights
International stock markets showed mixed performances. The Euro Stoxx 50 was down -0.06%, while China’s Shanghai Composite dropped to a one-week low, closing down -0.23%. In contrast, Japan’s Nikkei Stock 225 rose by +0.57%.
Interest Rates Overview
June 10-year T-notes (ZNM25) increased by +2 ticks today, with the yield on 10-year T-notes falling -0.4 basis points to 4.168%. T-notes reached a three-week high today, while the 10-year yield dropped to a low of 4.133%. The upward movement was spurred by rallies in European government bonds and weak U.S. employment data, which hinted at a dovish Fed policy. However, gains were tempered after the Q1 core PCE price index rose unexpectedly, adding some hawkish sentiment for Fed policy.
European government bond yields reflected downward movement, with the 10-year German bund yield down -2.8 basis points to 2.469%, and the 10-year UK gilt yield falling to a three-week low of 4.428%.
In the Eurozone, Q1 GDP showed growth of +0.4% quarter-over-quarter and +1.2% year-over-year, exceeding projections of +0.2% and +1.1%, respectively. German retail sales for March fell by -0.2%, outperforming expectations of -0.4%. The April CPI in Germany increased by +2.2% year-over-year, higher than the anticipated +2.1% but still marking the slowest growth in seven months. Market expectations place a 98% probability on a -25 basis point rate cut by the ECB during the June 5 policy meeting.
Stock Movers
Stocks within the “Magnificent Seven” are feeling the pressure, contributing to broader market declines. Tesla (TSLA) is down over -6%, with Nvidia (NVDA), Amazon.com (AMZN), and Meta Platforms (META) each down more than -3%. Alphabet (GOOGL) has fallen over -2%, while Microsoft (MSFT) and Apple (AAPL) are down more than -1%.
Super Micro Computer (SMCI) is leading declines in the S&P 500, with a drop of over -17% following its disappointing Q3 revenue report of $4.5 billion to $4.6 billion, significantly lower than the consensus estimate of $5.35 billion.
Norwegian Cruise Line Holdings (NCLH) has decreased by more than -11% due to softer forward bookings. Garmin Ltd (GRMN) is also down more than -9% amid a forecast for full-year EPS of $7.80, lagging behind the consensus of $7.91. Starbucks (SBUX) dropped over -8% after recording adjusted EPS of 41 cents, falling short of the forecast of 49 cents, while citing challenges from tariffs and fluctuating coffee prices.
Werner Enterprises (WERN) experienced a decline of more than -12% after Evercore ISI downgraded its stock from in line to underperform with a price target of $21. AppLovin (APP) is down over -9% after fielding concerns about a slowdown in mobile gaming and rising competition from Meta and Alphabet.
Finally, Carter’s (CRI) is down more than -4% after Wells Fargo Securities downgraded the stock to underweight from equal weight, with a new price target of $25. Seagate Technology Holdings (STX) is up, though specific details were not provided.
S&P 500 Winners Driven by Strong Q1 Earnings Reports
Several companies recorded notable gains following their recent earnings reports. Notably, one company surged over +8%, leading the S&P 500 after announcing Q1 revenue of $2.16 billion, surpassing the consensus estimate of $2.13 billion.
Qorvo (QRVO) experienced a rise of more than +7% after revealing a Q4 adjusted earnings per share (EPS) of $1.42, well above the consensus expectation of 99 cents. This solid performance reflects Qorvo’s continued strength in the semiconductor sector.
Trane Technologies (TT) saw its stock increase by over +5% following the announcement of Q1 adjusted EPS from continuing operations at $2.45, exceeding the consensus of $2.20. This beat underlines the company’s strong operational efficiency.
In the Nasdaq 100, GE HealthCare (GEHC) is leading with an increase of more than +3%. The company reported Q1 revenue of $4.78 billion, which is stronger than the consensus forecast of $4.66 billion, reaffirming its position in the healthcare technology market.
Western Digital (WDC) rose by more than +4% after forecasting Q4 revenue between $2.3 billion and $2.6 billion. The company also declared a cash dividend of 10 cents per share, signaling confidence in its financial stability.
PPG Industries (PPG) added over +3% to its stock price following the announcement of Q1 adjusted EPS at $1.72, surpassing the consensus of $1.64. The company also provided a full-year adjusted EPS forecast of $7.75 to $8.05, with the midpoint exceeding the consensus estimate of $7.80.
Upcoming earnings reports include Aflac Inc (AFL), Albemarle Corp (ALB), Align Technology Inc (ALGN), Allstate Corp/The (ALL), Amcor PLC (AMCR), American Electric Power Co Inc (AEP), American Water Works Co Inc (AWK), ANSYS Inc (ANSS), Automatic Data Processing Inc (ADP), AvalonBay Communities Inc (AVB), Caterpillar Inc (CAT), CH Robinson Worldwide Inc (CHRW), Cognizant Technology Solutions (CTSH), Crown Castle Inc (CCI), eBay Inc (EBAY), Equinix Inc (EQIX), Everest Group Ltd (EG), Garmin Ltd (GRMN), GE HealthCare Technologies Inc (GEHC), Generac Holdings Inc (GNRC), Globe Life Inc (GL), Hess Corp (HES), Host Hotels & Resorts Inc (HST), Humana Inc (HUM), Illinois Tool Works Inc (ITW), International Paper Co (IP), Invitation Homes Inc (INVH), KLA Corp (KLAC), Martin Marietta Materials Inc (MLM), Meta Platforms Inc (META), MetLife Inc (MET), MGM Resorts International (MGM), Microsoft Corp (MSFT), Mid-America Apartment Communities (MAA), Norwegian Cruise Line Holdings (NCLH), PPL Corp (PPL), Prudential Financial Inc (PRU), PTC Inc (PTC), Public Service Enterprise Group (PEG), Public Storage (PSA), QUALCOMM Inc (QCOM), Stanley Black & Decker Inc (SWK), Super Micro Computer Inc (SMCI), Trane Technologies PLC (TT), UDR Inc (UDR), Ventas Inc (VTR), VICI Properties Inc (VICI), Vulcan Materials Co (VMC), Western Digital Corp (WDC), and Yum! Brands Inc (YUM).
On the date of publication,
Rich Asplund
did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data are provided for informational purposes only. For more details, please view the Barchart Disclosure Policy.
here.
More news from Barchart
The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.
