Wall Street indexes sank into red after disappointing quarterly data from the construction machinery and equipment company Caterpillar and graphics chip maker Nvidia.
The blue-chip index Dow Jones Industrial Average wiped out 0.85% to 24,527.68 points. The benchmark rose by nearly 14% since the end of December.
The broader index S&P 500 lost 0.8%, while the technology Nasdaq Composite dropped by 1.1%.
The temporary compromise in the US budget dispute between the US President Donald Trump and the Democrats in the House of Representatives does not create new security for investors, but only prolongs uncertainty. At the moment, this is more like a delay than an agreement. Therefore, a new “shutdown” of the agencies in less than three weeks should not surprise anyone.
Earlier in the day, it became clear that the partial cessation of US government work has caused 1.6 billion USD in losses for Washington and the surrounding area. Many organizations, including state agencies, have been deprived of revenue worth tens of thousands to millions of dollars.
The yields on US bonds rose slightly at the end of the trading session. However, the growth was limited. The yields on 2-year US Treasuries rose to 2.59%, while the 5-year bonds rose to 2.58% and 10-year bond yields rose to 2.74%.
The main event of the week is the US Federal Reserve session. On Wednesday, the Fed will announce its decisions after its two-day meeting. It is expected that there will be no change in interest rates and a pause for interest increases.
Corporate stocks performance
The weaker business in China worried Caterpillar. The corporation disappoints analysts and investors with the latest quarterly data and business prospects for the current year. As a result, the stock price collapsed by more than 9%. The sales dynamics have recently declined significantly, especially in the vehicle and mining business.
The stocks of the graphics chip maker Nvidia fell by more than 15%. After all, the decline for the day was 13.82% to 138.01 USD per share. The weaker business in China has a negative impact on sales in the Christmas quarter.
The falling price of oil supported the stocks of the airlines. American Airlines shares added 4.1% to its value, while those of Delta Airlines rose by 1.0% and JetBlue added 3.5%. The downtrend of oil markets should mean lower costs for kerosene, which is good news for airlines.
The manufacturing company Entegris will acquire Versum Materials in a 3.8 billion USD deal. The share price has risen by over 6%, and those of Versum Materials – by 15%. Entegris shareholders will hold 52.5% of the new company, and those of Versum Materials – 47.5%. The newly created Entegris will have a stock price of about 9 billion USD.
The technology sector has been particularly hard hit, and not just in the US. Shares in Japan Display, a supplier to Apple, also fell almost 5% on Monday after the company warned of “harsh” earnings impact from the US-China trade war and the slowing Chinese economy.
Corporate earnings reports
Caterpillar reported fourth-quarter earnings Monday morning that missed Wall Street’s forecasts. The company said sales in its Asia/Pacific unit were down 4% from a year ago, primarily “due to lower demand in China”. It was Caterpillar’s biggest earnings miss in 10 years, according to research firm Bespoke Investment Group. Caterpillar issued an earnings outlook for 2019 that was also lower than Wall Street forecasts. Caterpillar forecast 2019 adjusted profit of 11.75 USD to 12.75 USD per share, compared with the average analyst estimate of 12.73 USD. The sales for the year are expected to increase modestly. The tariffs cost the company over 100 million USD last year. No relief was expected from higher import duties this year.
Nvidia warned investors today that it expects much weaker sales, thanks to China’s weakened economy and slipping demand from cryptocurrency miners. Nvidia says it likely made 500 million USD less than previously expected during the last financial quarter — 2.2 billion USD in revenue as opposed to 2.7 billion USD.