Dow on Shaky Ground as U.S. Stock Market Approaches ‘Moment of Truth’

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The Dow lagged the broader U.S. stock market on Monday, as investors shifted their focus to corporate earnings and shaky fundamentals – a pivot that could spell trouble for the Fed-inspired rally.

Dow Lags S&P 500 and Nasdaq with Triple-Digit Fall

The Dow Jones Industrial Average declined by as much as 185 points on Monday, reflecting a tepid pre-market for U.S. stock futures. It was last down 102 points, or 0.4%, at 26,322.31.

Dow Jones Industrial Average down triple-digits Monday afternoon. | Chart via Yahoo Finance.

Shares of Boeing Co (BA) plunged 4.6% after the company announced Friday it would temporarily cut production of its best-selling 737 MAX 8 jets. Bank of America Merrill Lynch immediately lowered its rating on the stock to neutral’ from ‘buy.’

The broad S&P 500 Index of large-cap stocks edged down 0.1% to 2,891.26. Utilities and industrial companies were the biggest drags on growth.

The technology-focused Nasdaq Composite Index was trading at 7,942.04, where it was virtually unchanged.

U.S. stocks just rounded out their best quarter since the financial crisis. Read more: S&P 500 Sees Best Start to a Year Since 1998.

U.S. Stock Market Lurches Toward ‘Moment of Truth’

The U.S. stock market faces a “moment of truth” as investors begin shifting their focus back to fundamentals and away from monetary policy, according to Morgan Stanley. In a research note published Monday, the bank’s chief U.S. equity strategist Michael Wilson said first-quarter earnings could be “gut check” time for Wall Street.

“The moment of truth may be arriving with first-quarter earnings results,’’ Wilson said, according to Bloomberg.

In Wilson’s view, Wall Street’s huge turnaround in the first quarter is entirely due to the Federal Reserve, which has not only refrained from raising interest rates but has scrapped plans for doing so this year. With no rate hikes expected for the remainder of the year, U.S.

The outlook may be about to change as S&P 500 companies get ready to deliver their latest financial results. For the first time since 2016, corporate earnings are expected to decline year-over-year. According to FactSet, industries such as energy, materials and information technology are expected to be the hardest hit.

Reporting season picks up later this week with a pair of results from JPMorgan Chase & Co (JPM) and Wells Fargo & Co (WFC).

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