US open: Stocks head south ahead of first-quarter earnings
Wall Street trading began with losses on Monday as jitters crept in ahead of the start of first-quarter earnings season later in the week.
At 1515 BST, the Dow Jones Industrial Average was down 0.53% at 26,284.92, while the S&P 500 had declined 0.27% to 2,884.95 and the Nasdaq traded 0.32% lower at 7,913.15.
The Dow opened down by 140 points as investors' focus shifted towards upcoming earnings announcements, with signs of progress in Sino-US trade relations taking a back seat,as Larry Kudlow said the two sides were getting closer to a deal and that top tier officials will meet for talks again this week.
James Hughes, chief market analyst at Axi Trader, said: "The Dow may have closed at close to six-month highs on Friday night, but with a potentially disappointing Q1 earnings season kicking off mid-week, the air of confidence does seem to be running a little thin.
"That sits at odds with Friday’s economic data, where the slightly better than expected non-farm payrolls print gave little cause for concern whilst lacklustre wage growth added to the idea that the Federal Reserve may yet be pushed into a more dovish position over interest rate policy, which in turn should be good for stocks."
Morgan Stanley strategists said that while they underestimated the impact of the Federal Reserve's pivot on equity prices, the earnings recession is "just the beginning". They warned that Q1 19 could be the first quarter of negative year-on-year growth in three years.
"With US stocks fully valued and the Fed maximum dovish at this point, we think there will need to be some evidence of a real turn in earnings growth for US stocks to advance much further. 1Q earnings season offers a gut check for a market looking for some evidence that the worst is truly behind us.
"We suspect this year's big rally in stocks has had a positive impact on corporate confidence. This could encourage them to maintain full-year guidance, which embeds a big second-half recovery in earnings growth. The question is whether the market will like that or instead prefer a lowered bar that is more achievable. We think it's a tough call but lean toward the latter."
In oil markets, Brent crude hit its highest level this year, breaching the $70 a barrel mark as tensions in Libya escalated, increasing the risk of supply disruptions.
"The turmoil in the oil-rich North African country is adding to the already tightening oil market where supplies are curtailed because of OPEC production cuts and US sanctions on Iran and Venezuela," said City Index analyst Fiona Cincotta.
In corporate news, Boeing shares flew 4.07% lower after the company said on Friday that it would cut its production of the troubled 737 MAX 8 aircraft.
On the macroeconomic front, US factory goods orders slid 0.5% in February, as expected by economists, after being unchanged in January.
Demand for transportation equipment declined the most, 4.5% versus the 0.4% decline recorded in January, followed by machinery (-0.6% versus 2.1%) and computers and electronic products (-0.5% vs -1.9%).
Orders for non-defence capital goods excluding aircraft, seen as a measure of business spending plans on equipment, edged down 0.1% after a 0.9% increase in January.
However, year-on-year, factory orders rose 2.4% in February.