US stocks fell on Monday, under pressure from declines in the stock prices of Boeing and General Electric. Wall Street digested the strong gains recorded during the previous week and looked forward to the start of the corporate earnings season.
The Dow Jones Industrial Average was down 109 points. Meanwhile, the Standard & Poor’s 500 Index lost 0.1% as the industrial sector fell 0.9%. The Nasdaq composite was down 0.2%.
Boeing shares fell more than 3.5% after Bank of America Merrill Lynch cut the company’s rating to neutral from buy. The bank said that it expects Boeing to postpone the production of the 737 Max Jet for six to nine months.
Meanwhile, GE shares fell more than 6% after JP Morgan lowered its target price to $5 from $6 per share, believing that many investors underestimate the severity of the challenges and risks faced by GE, while overvaluing a few small positive factors.
The declines came on Monday after major equity indexes posted their second weekly gain in a row last week, supported by advances on the US-China trade talks and strong jobs report data. On Friday, the Labor Department said 196,000 jobs had been created in March, according to President Donald Trump.
Market analysts consider that investors rode a hot hand last week, and that the investors’ focus will shift to quarterly corporate results as the earnings season begins on Friday. JP Morgan Chase and Wells Fargo are scheduled to report that day.
Wall Street expects this earnings season to be a difficult season. Standard & Poor’s 500 earnings in the first quarter are expected to fall by 4.2% YoY, according to FactSet. That would be the first contraction in earnings for the S & P 500 since the second quarter of 2016.
“From our perspective, the market will need beat and raise results in order to justify the premium valuation against the current economic and geopolitical backdrop,”
In terms of data, factory orders for February fell by 0.5% amid weakness in the sectors of machinery, transportation equipment and electronic products. However, shipments rose by 0.4%. Treasury yields also recorded gains on the data. The 10-year rate rose to about 2.51% while the 30 year yield was trading at 2.925%
Snap shares gained more than 3% after RBC Capital Markets upgraded the social networking company to outperform the sector, citing “potential for a positive inflection point catalyzing”.
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