Dow drops 700 points, Nasdaq slumps ahead of megacap tech earnings

On Apr 26, 2022

U.S. stocks were trading sharply lower Tuesday afternoon, failing to build on the previous session’s bounce, as investors sift through a raft of company results and await earnings reports due after the bell from tech giants including Microsoft Corp. and Google parent Alphabet Inc.

How are stock indexes performing?

The Dow Jones Industrial Average
DJIA
dropped nearly 736 points, or 2.2%, to about 33,314.
The S&P 500
SPX
fell about 110 points, or 2.6%, to 4,186.
The Nasdaq Composite
COMP
shed 475 points, or 3.7%, to trade around 12,530.

Monday saw the biggest intraday reversal since February for the Dow, which rose 238 points, or 0.7%, erasing a loss of nearly 500 points. The S&P 500 rose 0.6%, and the Nasdaq Composite gained 1.3%.

Also read: U.S. stocks ended a Manic Monday in the green — but intraday bounces like this aren’t bullish

What’s driving markets?

Stocks were sinking Tuesday afternoon, with all three major benchmarks down after Monday’s rally.

“Investors are not necessarily secure” in the strength of the market, with “fragility” on display since the beginning of the year, said Aoifinn Devitt, chief investment officer at Moneta, in a phone interview Tuesday. “There is this fear of slowing growth.”

The CBOE Volatility Index
VIX
jumped nearly 18% to almost 32 Tuesday afternoon, according to FactSet data. That compares with a 200-day moving average of around 21.

Consumer discretionary
XX:SP500,
information technology
XX:SP500
and communication services
XX:SP500
were the hardest hit sectors of the S&P 500 in early afternoon trading Tuesday, according to FactSet data. Tech and communications services had posted the strongest performance for the S&P 500 in Monday’s stock market rally.

“Now we have this giveback today,” said Devitt. “Markets are trying to figure out a level.”

The S&P 500 is trading not far off its closing low this year of 4,170.70 on March 8, according to Dow Jones Market Data. The Nasdaq was trading below its 2022 closing low of 12,581.22, hit March 14, FactSet data show, at last check.

U.S. stocks were falling as investors wade further into the busiest week of the U.S. company-earnings reporting season, digesting results from a number of corporate heavyweights released before the opening bell. They’re also looking ahead to results from megacap tech companies Microsoft Corp.
MSFT
and Google parent Alphabet Inc.
GOOG
after the closing bell.

Tech giants are “big movers in the market,” said Paul Nolte, a portfolio manager at Kingsview Investment Management, by phone Tuesday. Both the S&P 500 and Nasdaq are “dramatically impacted by tech.”

Formerly high-flying Netflix
NFLX
shares have dropped more than 40% since announcing last week…