With Earnings In Focus, U.S. Stocks Slip

An increasing number of investors anticipate another increase in interest rates in the near future

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With some of the largest U.S. corporations set to report earnings this week, stocks dipped slightly and bond yields climbed ahead of a busy week of earnings reports.

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A calm swept across a range of markets in April, including stocks, bonds, and currencies, after the first quarter was marked by volatility across a range of asset classes. Early on Monday morning, the market continued to trade with muted moves.

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In terms of the stock market, the S&P 500 fell 0.2% and the Nasdaq Composite dropped 0.4%. On the other hand, the Dow Jones Industrial Average lost less than 0.1% of its value.

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There has been a large swing in the price of individual shares, particularly for some of the companies that have reported results. Despite a strong start to earnings last week from big banks, analysts predict that overall earnings for the S&P 500 will decline for another straight quarter, marking its steepest quarterly decline since the start of the decade. There are a number of companies reporting this week, including Tesla, Johnson & Johnson, and Netflix.

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As investors watch what executives say about the banking crisis and their lending standards moving forward, the quarter will be one of the most important ones for regional banks in decades.

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Upon reporting lower-than-expected first-quarter earnings, State Street shares fell around 12%. In its most recent quarter, Charles Schwab reported higher profits, but lower deposits. There was a 3.2% rise in shares of the brokerage.

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Gabelli Funds' co-chief investment officer of value, Chris Marangi, believes earnings will be relatively conservative for the next 12 to 18 months.

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In addition, investors are paying close attention to interest-rate hikes. Many expect another increase at May's Fed meeting, a significant turnaround compared with a month ago when fears that the Fed would have to reduce its rate-hike cycle. As a result of Fed comments last week, rate increases are once again a possibility.

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CME Group data show there is an 84% probability the Fed will raise interest rates by 0.25 percentage points in May, based on futures prices traded Monday. Over the past month, that number has increased from 21% a month ago to 78% on Friday.

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Treasury yields rose from 3.521% to 3.595% on Friday. There was a 0.5% gain in the WSJ Dollar Index.

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As head of Rabobank's foreign-exchange strategy, Jane Foley said, the market has come to terms with the Fed's likely hikes in May. The Fed's speakers this week may provide some insight into what will happen at Fed meetings in June and beyond, she said.

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According to The New York Times, Google is preparing radical changes to its search algorithm to compete with artificial intelligence. Alphabet shares fell 3.4% after the report.

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It was close to a flat on the Stoxx Europe 600. Hong Kong's Hang Seng Index gained 1.7% and the Shanghai Composite jumped 1.4%. The Nikkei 225 slipped 0.1%, while the Nikkei 225 in Japan closed 1.9% higher. Brent crude, which is the international oil benchmark, shed 1.7% to trade around $84.85 a barrel.

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