Stocks slide to start August down amid earnings and data deluge

U.S. stocks fell Monday in a choppy start to August trading as Wall Street struggled to maintain July’s momentum.

The S&P 500 and Dow Jones Industrial Average each fell about 0.3%, while the Nasdaq Composite held near balance.

Investors reflected on a flurry of data early in the session that showed manufacturing activity expanded at the slowest pace in more than two years. The Institute for Supply Management’s factory activity indicator fell to 52.8 from 53 a month earlier, marking the lowest level since June 2020.

Meanwhile, separate data from S&P Global showed finished goods inventory accumulation falling for the first time since October 2020.

Monday’s moves come after stocks capped a month of strong gains on Friday. In July, the benchmark S&P 500 index rebounded 9.1%, battling its worst start to the year since 1962. The Nasdaq Composite climbed 12.3% to record one of its best months on record , and the Dow Jones Industrial Average rose 6.7% for the month.

DataTrek’s Nicholas Colas points out that over the past few weeks stocks have reflected typical “risk” behavior, with small cap stocks outperforming large caps and the Nasdaq Composite beating the S&P 500. The rebound came as the It was expected that recent signs of a slowing economy could prompt the Federal Reserve to scale back its fall interest rate hike cycle.

“Summer is a great time to go camping, but we’re not out of the woods yet,” Bank of America analysts said in a note Sunday morning, warning of further headwinds for stocks.

In the past five recessions, the S&P 500 has only bottomed after earnings estimates for the index have been revised down – with the exception of 1990 when forward EPS was flat – but the reductions in estimates are just beginning, BofA pointed out.

“Our bull market indicator signs also indicate that it is premature to call a bottom,” the analysts said, adding that historical market bottoms occur when 80% of a bottom’s indicator signs are triggered. up from just 30% currently and that bear markets usually end. only after the Fed begins cutting rates – a move likely in at least six months.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 26, 2022. REUTERS/Brendan McDermid

Investors are expecting another busy week of economic data and corporate earnings. The Labor Department’s July jobs report is the major event of the week, with data released on Friday expected to show nonfarm payrolls rose by 250,000 in July.

Meanwhile, 150 other S&P 500 companies are on deck to report their second-quarter results.

While some earnings have been better than expected, among about 56% of companies that have reported results so far for the second quarter, earnings have only exceeded estimates by 3.1%, below the five-year average. by 8.8%, according to FactSet data. To research.

Releases from companies including Aflac (AFL), Activision Blizzard (ATVI), Pinterest (PINS) and World Wrestling Entertainment (WWE) are available Monday.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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