S&P 500 stays above 3800, despite losing as earning season looms

• The three major US equity indices plunge between 0.29% and almost 2%.
• Risk-aversion dominates Monday’s trading session, on China’s covid-19 fears and high inflation reducing corporate profits as the earnings session looms.
• Fed’s George worried that faster rates would be harmful to the economy.
• Fed’s Bullard commented that the US economy is solid and can withstand higher rates.

US stocks snapped five days of consecutive gains, trading lower on Monday, courtesy of risk aversion and fears that earnings would miss expectations due to the deteriorating economic outlook, spurring an appetite for safe-haven assets

At the time of writing, the S&P 500 sits at 3863.20, falling 0.93%, while the heavy-tech Nasdaq tumbles by 1.86% at 11,420.73. In the meantime, the Dow Jones Industrial slumps 0.29%, sitting at 31,246.41

Sector-wise,  the leading sectors are Utilities, up by 0.37%, followed by Real Estate and Health, each recording gains of 0.20 % and 0.02%, respectively. As the appetite for riskier assets diminished, the biggest losers were Communication Services, Consumer Discretionary, and Technology, plummeting 2.59%, 2.31%, and 0.96% each.

Stocks fell due to renewed worries about China’s Covid-19 resurgence and tumbling commodity prices. Corporate America will begin earnings season late in the week, which could signal a high inflation impact on businesses. The US economic calendar will reveal inflation among consumers and producers, US Retail Sales, and the University of Michigan (UoM) Consumer sentiment.

In the meantime, Fed speakers crossed newswires, led by Kansas City Fed President Esther George, who said that “moving interest rates too fast raises the prospect of oversteering.” George said she agreed that hiking rates faster to dampen inflation, though she expressed concerns that it could harm the economy. Later, the St. Lous Fed President James Bullard reiterated that the US economy is solid and can handle higher rates while backing a 75 bps rate hike for the July meeting.

The US Dollar Index (DXY), a measurement of the greenback’s value against some currencies, rallies 1.04% to 108.003, while the 10-year US Treasury yield losses some ground dropping nine basis points, yielding 2.993%.

The US crude oil benchmark in the commodities complex, WTI drops 0.70%, exchanging hands at $104.05 BPD. Meanwhile, precious metals like gold (XAU/USD) drop 0.47%, trading at $1734.20 a troy ounce.

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