Maybe Corporate America isn’t coming to Wall Street’s rescue after all.
The Dow is set to open down nearly 400 points on Tuesday after major US companies reported gloomy results and guidance. Disappointing numbers from Caterpillar and 3M reinforced ongoing concerns about how long blockbuster profits can last, especially given tariffs and rising costs.
The S&P 500 and Nasdaq are also on track to open more than 1% in the red.
“Investors are skittish about whether we’ve seen a peak in earnings,” said Mark Luschini, chief market strategist at Janney Capital Management. “It’s a schizophrenic market environment where things that didn’t matter suddenly do.”
Wall Street was also spooked by extreme turbulence in China, the epicenter of the trade war. The Shanghai Composite dropped 2.3% overnight. The sell-off wipes out a chunk of Monday’s spike, the benchmark index’s best day since March 2016.
A number of large American companies with exposure to growing trade disputes reported their quarterly financial results Tuesday. Investors are worried that a slowing Chinese economy and an escalating trade war could pinch profits.
3M (MMM) shares plunged 7% after the maker of Post-it Notes reported a dip in sales and weaker-than-expected profits. Worse, the Dow component downgraded its earnings forecast for the year.
Caterpillar (CAT), a closely-watched barometer of global growth, fell sharply after the maker of construction and mining equipment issued disappointing guidance. Caterpillar, another Dow component also warned of “higher material and freight costs, including tariffs.”
The 3M and Caterpillar results highlight lingering worries about whether the US economy and stock market can continue to grow rapidly.
“How long is this going to last?” asked Luschini. “Companies that only match earnings get punished. And ones that miss expectations get outright slayed.”
But the news wasn’t all gloom-and-doom from Corporate America. McDonald’s logged declines in earnings and sales but managed to beat expectations.
United Technologies (UTX), another major global company, raised its outlook. And Verizon said it grew profit and revenue more than investors anticipated.
Also reporting is Harley Davidson (HOG), the motorcycle manufacturer that plans to shift some manufacturing overseas in response to the threat of tariffs on US goods.
Overseas markets were sharply lower Tuesday. Hong Kong’s Hang Seng index fell 3% in trading there, and Japan’s Nikkei fell almost as much. The Dax in Germany was down 1.7% in early trading in Europe.
October has been a rocky month for stocks. The Dow is on pace for its worst month in more than two years.
