The Dow and broader U.S. stock market declined in unison on Tuesday, as jittery investors pivoted away from riskier assets in anticipation of a gloomy earnings season for Wall Street.
Dow Falls Hard; S&P 500, Nasdaq Follow
All of Wall Street’s major indexes headed lower on Tuesday, with the Dow Jones Industrial Average losing as much as 238 points. The blue-chip index was last down 210 points, or 0.8%, at 26,130.78.
The Dow Jones Industrial Average falls triple digits as U.S. tariff threat, earnings expectations weigh. | Chart via Yahoo Finance.
The broad S&P 500 Index of large-cap stocks declined 0.64% to 2,877.2, with ten of 11 primary sectors trading in the red. Sectors tied to primary commodities were the hardest hit, with industrials and energy companies declining by at least 1.46%.
Meanwhile, the technology-focused Nasdaq Composite Index fell 0.57% to 7,908.2.
The CBOE Volatility Index, also known as the VIX, reached a session high of 14.19 on a scale of 1-100 where 20-25 represents the historic average. It last traded at 14.35, having gained 8.88% on the day.
Valuation Risks Threaten Bull Market as Earnings Season Underway
U.S. corporate profits set to decline for the first time since 2016. | Source: Shutterstock.
Wall Street’s earnings season begins in earnest this week, with JPMorgan Chase & Co (JPM) and Wells Fargo & Co (EFC) due to report on Friday. For the first time since 2016, annual profits for S&P 500 companies are forecast to decline, with energy, materials, and information technology stocks likely to be the hardest hit.
With the S&P 500 coming off its best start to a year since 1998, some investors are worried that declining profits could undermine the bull market. The large-cap index already suffers from overvaluation risks; at current levels, its per-share earnings are more than 16.5 times forward earnings. According to data from Morgan Stanley, that’s the average reading of the past five years and a strong indication that the market is overvalued.
Read more: Does This Chart Spell Doom for the S&P 500 Index?
Reporting season picks up next week with Dow blue-chips Goldman Sachs Group (GS), IBM Corp (IBM), and UnitedHealth Group Inc. (UNH) all set to report on Monday. Netflix Inc. (NFLX) will also hold its earnings call Monday.