U.S. stocks traded lower Monday as fresh geopolitical worries resurfaced after President Donald Trump tweeted a strong warning to Iran, which overshadowed corporate earnings that have so far been positive, with more than one-third of the S&P 500’s components set to report.
Tesla Motors was also in the spotlight, sinking after a report the electric-car maker was asking suppliers for refunds.
What are the main benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.06% dipped 32 points, or 0.1%, to 25,025. The S&P 500 index SPX, +0.17% slipped 2 points, or 0.1%, to 2,800. The Nasdaq Composite Index COMP, +0.17% declined 17 points, or 0.2%, to 7,803.
The day’s losses were widespread, with nine of the 11 primary S&P 500 sectors in negative territory.
Should the Dow and S&P end the day in negative territory, it would mark their third straight daily drop. The Nasdaq is on track for its fourth straight decline, its longest such stretch since April, although two of the daily declines were less than 0.1%.
What’s driving markets?
Investors could be facing a fresh worry on the geopolitical front after Trump lashed out at Iranian President Hassan Rouhani in an all-caps tweet on Sunday evening, warning him not to threaten the U.S. That came hours after Rouhani cautioned Trump against pursuing a hostile policy toward his country.
To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!
— Donald J. Trump (@realDonaldTrump) July 23, 2018
Oil prices, sensitive to tensions involving oil-producing countries, were moving higher on Monday, with September Brent crude LCOU8, -0.47% up 1% to $73.80 a barrel and U.S. crude for the same month CLU8, -0.75% up 0.5% to $68.59 a barrel.
Meanwhile, finance ministers and central bankers from the Group of 20 made little progress on trade tensions at a weekend meeting in Buenos Aires, as both U.S. and European Union officials held their ground. Investors have been worried spats between the U.S. and other major trading partners explode into a full-scale trade war, damaging economic growth and investments.
Earnings season kicks into high gear this week, with Google parent Alphabet Inc. GOOGL, +0.69% GOOG, +1.08% due to report after the bell on Monday. Analysts are bracing for the tech giant’s profit to take a hit as its absorbs the European Union’s $5.07 billion Android antitrust fine. With nearly 18% of the S&P having reported, earnings are up more than 21% this quarter, providing a underpinning of support to stocks.
What are analysts saying?
“We have a trend of strong corporate fundamentals and economic data, and also a Federal Reserve that is willing to slow its pace of interest-rate hikes if the market wobbles. Those factors will support risk appetite even if negative trade headlines remain,” said Alec Young, managing director of global markets research at FTSE Russell.
“The degree to which we have a negative reaction to trade is related to the degree to which it erodes fundamentals. However, so far there’s little evidence that it is having an impact on earnings or revenue, or data or business sentiment,” he said.
Which stocks are in focus?
Shares of Tesla TSLA, -3.73% fell 3.5% after a report that the company has asked suppliers for refunds to help it become profitable. Tesla will report second-quarter results on Aug. 1. The stock is down 4.8% thus far this year, and it has shed nearly 14% in July.
Hasbro Inc. HAS, +13.74% jumped 13% after it reported second-quarter results that easily topped forecasts. Halliburton Co. HAL, -8.28% sank 8% after reporting results that were roughly in line with expectations.
LifePoint Health Inc. LPNT, +35.39% jumped 34% on the company’s merger with RCCH HealthCare Partners, which is owned by funds managed by affiliates of Apollo Global Management APO, +0.76% The deal values the company at roughly $5.6 billion. Shares of Apollo were up 0.4%.
Papa John’s PZZA, -8.97% lost 6.9% after the stock was downgraded to sell at Stifel Nicolaus. The firm also cut its price target on the stock to $38 from $50. The pizza company has been volatile of late, following revelations that the company’s founder used a racial slur during a recent conference call. Subsequently, merger talks between the company and Wendy’s Co. WEN, -1.18% cooled, according to The Wall Street Journal.
Financials provided a rare bright spot in the market, with the sector up 0.9%, supported by a rise in long-dated bond yields. Among notable movers in the financial sector, JPMorgan Chase & Co. JPM, +2.46% rose 1.5% while Bank of America Corp. BAC, +2.21% was up 1.6%. Wells Fargo & Co. WFC, +2.32% rose 2%.
What is on the economic docket?
A measure of the U.S. economy from the Chicago Federal Reserve rebounded aggressively in June after a sharp downward revision to May’s already weak performance. A factory-sector rebound was the biggest help to the national index.
No Federal Reserve officials are scheduled to speak as it is a blackout week ahead of the central bank’s two-day policy meeting July 31 to Aug. 1.
What are other markets doing?
European stocks SXXP, -0.19% were trading mostly lower, while Asian stocks ADOW, +0.14% finished mixed. The Nikkei 225 index NIK, -1.33% tumbled 1.3% as the Japanese yen USDJPY, +0.00% climbed, on a report by Reuters that Bank of Japan officials were looking into how to make a more sustainable stimulus program. Chinese stocks went the other direction, with the Shanghai Composite Index SHCOMP, +1.07% rising 1%.