U.S. stocks fell sharply in late trading Monday on news that Apple ( AAPL ) plans to slow hiring and curb spending next year to prepare for a possible recession.
[Click here to read what’s moving markets on July 19, 2022]
Bloomberg news reported Monday afternoon that the hiring slowdown and the spending cuts will occur in certain divisions and stem from a move to “exercise more caution in times of uncertainty,” according to people familiar with the matter who asked not to be identified. Apple shares closed up 2.1%.
The S&P 500 and Nasdaq each fell about 0.8%, while the Dow Jones Industrial Average dropped more than 200 points, or 0.7%. Before the report, all three major indexes hit session highs of at least 1%.
The Wall Street Journal reported that Federal Reserve officials “said they are likely to raise interest rates by 0.75 percentage points later this month.” Expectations for a 100 basis point hike from the Fed at its next meeting on July 26-27 rose last week after a warm consumer price index (CPI) reading for June.
Bank of America (BAC) and Goldman Sachs rounded out banking results ahead of Monday’s trading session. Goldman Sachs reported a smaller-than-expected 48% drop in second-quarter profit as losses were partially offset by strength in its fixed-income trading business. Meanwhile, Bank of America saw its profit fall 34%, dragged down by a drop in investment banking revenue amid sluggish trading activity.
The results come after the financial sector posted its best intraday recovery since May on Friday, boosted by a remarkable second-quarter run by Citigroup ( C ), a day after traders weighed in on disappointing financial results from JPMorgan ( JPM ) and Morgan Stanley (MS).
JPMorgan chief Jamie Dimon warned in a post-earnings call Thursday that risks to the U.S. economy look “closer than they were before” and said the outlook will depend “on how effective of quantitative tightening and flawed and volatile markets.”
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Similar comments are expected from leaders across corporate America this week, as more companies reveal how their businesses fared during a volatile past quarter. Not only are the numbers expected to reflect softer profits, but traders are also bracing for possible downward guidance revisions as companies outline the impact of rising prices, tightening quantitative and the war in Ukraine in its commercial prospects.
“The most important indication for the economy in the coming weeks will be the earnings release as reported by companies,” Gargi Chaudhuri, head of investment strategy for iShares, Americas at BlackRock, said in a note.
NEW YORK, NEW YORK – JULY 12: A woman walks near the New York Stock Exchange on July 12, 2022 in New York. Wall Street has fallen again amid the recession, with the S&P 500 closing down 1.2%, while tech stocks pushed the Nasdaq down 2.3%. (Photo by John Smith/VIEWpress)
“We are watching to see if companies can still continue to push higher prices to their consumers and which sectors are significantly revising their earnings forecasts down for the future,” Chaudhuri added. “We’ll also be watching to see how many downside risks will be felt in earnings calls.”
More than 70 companies are expected to release results this week. Big tech gains are expected to come, starting with Netflix ( NFLX ) after the market close on Tuesday, Tesla ( TSLA ) after the bell on Wednesday and Twitter ( TWTR ) before the start of trading on Friday.
Monday’s moves in markets come after a rally on Friday that saw stocks close strongly higher as Wall Street tried to erase losses from a turbulent week brought on by the June CPI print. Still, the S&P 500, Dow and Nasdaq ended the week lower.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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