Dow Retraces Over 200 Points Following Underwhelming Wave of Latest Earnings Reports from Apple, Johnson & Johnson, Others

The Dow Jones Industrial Average (DJIA) plunged more than 200 points on Monday, once again snuffing out signs of a sustained rally. The latest pullback comes following the release of earnings reports by leading pharmaceutical corporation Merck (NYSE: MRK) and tech giant Apple (NASDAQ: AAPL). Both companies posted less-than-impressive numbers, with Meck’s stock off by $1.87, or 2.0%, while Apple’s shed $2.89, or 1.9%. The combined effect of this letdown resulted in a nearly 31-point drag on the Dow alone.

Dow Sinks Over 200 Points as Apple Provides Grim Internal Operational Outlook

The Dow sank 215.65 points, or 0.69%, to 31,072.6, with a significant chunk of losses accelerated in the final hour of trading. This also eroded most of a 356-point gain that the benchmark index had managed earlier in the trading session. The two other major indexes also slipped up, with the S&P 500 sliding 0.84% to 3,830.85, and the Nasdaq Composite shedding 0.81% to 11,360.05.

In addition to its stagnated financial report, Apple also announced intentions to cut back on hiring and spending next year. Apple plans to do this to better manage a possible downturn as the company prepares for the near future. As reported by Bloomberg, this revelation also contributed to Apple’s stock decline, which has now slipped 17% in 2022. Speaking on the Apple situation, Peter Boockvar, chief investment officer at Bleakley Advisory Group, explained:

“When Apple, a $2.4 trillion dollar company market cap-wise, rolls over, it’s obviously going to have a pronounced impact on the headline indices and it just reminds people that companies are buckling down because of what they’re seeing out there.”

Furthermore, Boockvar also emphasized the importance of Apple’s earnings to the broader market on several fronts. These include the currency management, the Chinese business outlook, and how it handles consumer shift towards services rather than goods. “People are not going to keep buying laptops every year, and they’re not going to replace their phone every year,” Boockvar explained.

Other Less-than-stellar Earnings

Other company earnings that significantly contributed to the Dow 200-point slide include Johnson & Johnson, Amgen Inc, and Verizon Communications Inc. All three corporations slid 2.24%, 1.95%, and 1.45%, respectively. This seemed to be a reversal of fortune for the broader market following Goldman Sachs’ strong earnings posted earlier. The New York-based banking giant had initially buoyed stocks. However, this followed mixed results last week from fellow leading financial institutions JPMorgan Chase and Morgan Stanley.

Analysts are preaching investor caution as the market expects financial earnings reports from several big-name businesses this week. Scott Chronert, managing director at Citigroup, said:

“We anticipate volatility to remain elevated as the market toggles between pricing recession risk and soft landing probabilities with each piece of data.”

Despite fears of a looming recession, the major indexes may fare reasonably well. For instance, expectations are that S&P 500 companies will post a 4.2% year-over-year increase in Q2 profit. In addition, FactSet predicts that total revenues realized within this benchmark index will expand 10.2% in the quarters.

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