The Wall Street suffered a major setback on Monday as weak earnings reports from some of the largest companies sent shockwaves through the market, fanning fears of a looming economic slowdown. The Dow Jones Industrial Average plunged 2.3%, wiping out more than 600 points, while the S&P 500 dropped 2.8%, and the Nasdaq Composite fell 2.5%.
The selloff was driven by a wave of disappointing earnings from blue-chip companies, including Caterpillar, AT&T, and McDonald’s, which missed analysts’ expectations. Caterpillar, the world’s largest construction equipment manufacturer, reported weaker-than-expected earnings and revenue for the first quarter, citing supply chain disruptions and rising raw material costs.
Similarly, telecom giant AT&T posted a loss of 620,000 subscribers in its HBO Max streaming service, casting doubt on its ability to compete with rival platforms such as Netflix and Disney+. Meanwhile, fast-food giant McDonald’s reported a decline in global same-store sales, blaming pandemic-related restrictions and labor shortages.
The weak earnings reports sparked concerns among investors that the economic recovery from the pandemic may be losing momentum, especially as inflationary pressures continue to rise. The latest data showed that the U.S. consumer price index surged 2.6% in March from a year earlier, the largest increase in nearly a decade.
“The market is starting to digest the reality that the easy money from the stimulus and the reopening is starting to be behind us,” said Mike Wilson, chief U.S. equity strategist at Morgan Stanley.
The selloff also coincided with a spike in bond yields, with the benchmark 10-year Treasury note rising to 1.61%, its highest level since mid-March. The rising yields signaled that investors are becoming increasingly concerned about inflation and the potential for the Federal Reserve to tighten monetary policy sooner than expected.
Despite the selloff, some analysts remained optimistic about the long-term prospects of the market, citing the robust earnings growth and strong corporate balance sheets. They also noted that the market had been due for a pullback after a prolonged period of gains.
“We’ve had an extraordinary run, and it’s not surprising to see some degree of correction after such a strong rally,” said Hugh Johnson, chief investment officer at Hugh Johnson Advisors.
Nevertheless, the latest selloff highlighted the fragility of the market, which has been buoyed by stimulus measures and easy monetary policies. With the economic recovery still facing headwinds, investors will be closely monitoring the upcoming earnings reports from other major companies to gauge the health of the market and the broader economy.
