U.S. Stocks Slip After Worst Month Since 2020

Investors are awaiting the Federal Reserve’s policy meeting on Wednesday for more signals on the pace of monetary tightening, with markets anticipating another rate increase to counter the highest inflation in decades. The war in Ukraine and a Covid-19 outbreak in China threaten to further snarl supply chains and boost prices. 

“It’s a market that is jittery and nervous,” said Sebastien Galy, a macro strategist at Nordea Asset Management. NDA.FI -1.90% “It has been fed liquidity for a long time, and this has been built into expectations for stocks,” he said, a situation that is now changing as central banks tighten monetary policy.

With four months in the books, the stock market is putting in its worst performance in decades. The S&P 500, down 13% so far this year, has had its worst start to a year since 1939, according to Dow Jones Market Data.

The S&P 500 fell 8.8% in April and the Dow industrials declined nearly 5%, the worst monthly performance since March 2020. The Nasdaq Composite retreated more than 13% last month, its worst showing since October 2008. Tech stocks are particularly sensitive to higher interest rates. 

The yield on the benchmark 10-year Treasury note edged up to 2.973% from 2.885% on Friday, rising for a fourth consecutive trading session. The yield has not been above 3% since late in 2018. The U.S. dollar held on to its recent gains, with the WSJ Dollar Index rising another 0.1% after its biggest monthly jump in a decade.

Among individual stocks, shares of Spirit Airlines fell 7.3% after the company rejected an acquisition offer from JetBlue Airways, sticking with an existing plan to merge with Frontier Group. JetBlue shares were up 1.7%, Frontier was down 1.5%.

Shares of Moody’s slid 8% after the credit rating company said its profit fell by about a third as costs rose. 

Earnings season continues this week. Expedia and Clorox CLX 1.10% are scheduled to post results on Monday after markets close. Pfizer, KKR, Airbnb, Starbucks and Lyft are scheduled for Tuesday, and Moderna, Marriott International and Uber are on Wednesday. Kellogg and Apollo Global Management are slated for Thursday.

Earnings season has been reasonably strong so far, with over 80% of companies that have reported to date beating analysts’ expectations, according to Refinitiv. Stocks fell last month despite this, due to nerves about the months ahead, investors said.

Oil prices slid, with U.S. crude down 3.9% to $100.62. European Union officials are working on a proposal to sanction Russian energy. Some are skeptical it will pass since it requires unanimous support from EU members, many of whom rely on Russian energy, according to analysts at Nordic bank SEB. A benchmark for natural gas in Western Europe declined 3%. 

Traders are also monitoring lockdowns in China and looking ahead to a meeting of the OPEC+ alliance later this week, where members are set to discuss its supply agreement.  

The pan-continental Stoxx Europe 600 declined 1.2%. Data releases showed German retail sales fell in March, when economists expected an increase and consumer confidence in the EU declined more than expected. Wind turbine maker Vestas Wind Systems fell 8.3% after it cut full-year guidance and reported a bigger loss than expected due to write-downs on assets in Russia and Ukraine. The U.K. stock market was closed for a holiday. 

In Asia, most major benchmarks edged down moderately. South Korea’s Kospi fell 0.3% and Japan’s Nikkei 225 declined 0.1%. Markets in China and Hong Kong were closed for the Labor Day holiday. 

Write to Anna Hirtenstein at [email protected]