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The stock market was trying to bounce back Monday from steep losses on Friday, as investors look ahead to Wednesday’s FOMC meeting.
Shortly after the open, the
Dow Jones Industrial Average
slipped 62 points, or 0.2%, while the
S&P 500
fell 0.3%, and the
Nasdaq Composite
declined 0.3%.
The market is trying to recover from Friday’s selloff, which saw the Dow fall almost 3%, the S&P 500 shed more than 3%, and the Nasdaq tumble more than 4%. But if investors were looking for reasons to keep buying, they were hard to find. There “was no improvement over the weekend on the three headwinds pressuring stocks: Chinese growth worries, Ukraine war and hawkish Fed,” wrote Tom Essaye, founder of Sevens Report Research.
China’s zero-tolerance policy for the spread of Covid-19 is causing some economic activity to shut down, with both its services and manufacturing purchasing managers’ indexes coming in below 50, the level that separates a growing economy from a shrinking one, in March. Slower Chinese growth is already causing some companies to warn investors about second-quarter results, with
Apple
(ticker: AAPL) saying it could see a $4 billion to $8 billion sales hit in the quarter because of limited supply from China.
Other economic concerns still linger. The Federal Reserve is adamant about bringing down high inflation by lifting short-term interest rates and reducing its bondholdings, which lowers bond prices and lifts their yields. That isn’t new to investors, but the market is still trying to figure out how fast the Fed will go and how quickly it will reduce its balance sheet, a process known as quantitative tightening.
The stock market has a long way to go before it looks like markets are becoming solidly optimistic. The S&P 500 is still 11% below its March 29 level, which marked a multi-month peak. It’s still below its 50-day moving average, indicating that market participants are still not comfortable buying stocks at levels consistent with their recent trend.
“With the SPX coming off one of its worst months in the last half century…with the specter of aggressive rate hikes in the near future, the mood isn’t exactly hopeful,” wrote Frank Cappelleri, chief market technician at Instinet.
Sentiment on the market remains low right now, as appetite to buy stocks just hasn’t fully rebounded yet. A survey of sentiment for individual investors shows a 13-week average that is close to a multi-decade bottom, according to 22V Research. “Sentiment readings remain depressed as investors work through uncertainty tied to U.S. monetary policy, European growth, and China COVID lockdowns and stimulus,” wrote Dennis DeBusschere, founder of 22V Research.
The Fed makes its decision on how quickly to raise interest rates—which it will likely do—this Wednesday afternoon.
“There will be some clarification on the U.S. policy front this week, setting the backdrop for another potential positive narrative shift,” DeBusschere wrote.
Shares in Asia fell Monday after data showed China’s manufacturing activity contracted more than expected in April, as continued stringent lockdowns in Shanghai and other cities disrupted production. Stock markets in Shanghai were closed.
Here are six stocks on the move Monday:
Amazon.com
(AMZN) has dropped 2% after the stock fell sharply Friday following a weaker-than-expected sales forecast for the second quarter.
Apple stock was down 0.6%. The European Commission issued a formal complaint against the company for abusing its position in the mobile-wallets market. Shares declined 3.7% on Friday after the tech giant issued a cautious outlook for the June quarter.
Global Payments
(GPN) stock dropped 8% after the company reported a profit of $2.07 a share, beating estimates of $2.04 a share, on sales of $2.16 billion, above expectations for $1.95 billion.
ON Semiconductor
(ON) stock gained 3.2% after the company reported a profit of $1.22 a share, beating estimates of 17 cents a share, on sales of $1.95 billion, above expectations for $1.91 billion.
Berkshire Hathaway
’s
Class B shares (BRK.B) fell 0.3% after the conglomerate led by Warren Buffett reported first-quarter operating earnings after taxes of $7 billion, up less than 1% from the year-earlier period, as the company scaled back the repurchase of its shares as the stock price rallied.
American depositary receipts of
NIO
(NIO) rose 2.3% after deliveries for its electric vehicles in April fell from the month earlier.
Write to Joe Woelfel at joseph.woelfel@barrons.com and Jacob Sonenshine at jacob.sonenshine@barrons.com
Read More: Stocks Fall as April’s Selloff Continues Into May