U.S. stocks fell sharply in the final hour of trading on Monday after news that Apple ( AAPL ) plans to slow hiring and curb spending next year to prepare for a possible recession.
Bloomberg News reported Monday afternoon that the hiring slowdown and cost cuts will take place in certain divisions and stem from an effort to “be more prudent in uncertain times,” citing people familiar with the matter who spoke on condition of anonymity. Apple shares closed down 2.1%.
The S&P 500 and Nasdaq were down roughly 0.8 percent, while the Dow Jones Industrial Average lost more than 200 points, or 0.7 percent. Ahead of the report, all three major indexes hit session highs of at least 1%.
The Wall Street Journal reported that Federal Reserve officials “have signaled they are likely to raise interest rates by 0.75 percentage points later this month.” Expectations for a 100 basis point hike by the Fed at its next meeting on July 26 and 27 rose last week after a hot consumer price index (CPI) report for June.
Bank of America (BAC) and Goldman Sachs rounded out banking results ahead of Monday’s trading session. Goldman Sachs reported a smaller-than-expected 48% drop in second-quarter profit as losses were partially offset by strength in its fixed-income trading business. Bank of America, meanwhile, reported a 34% drop in profit, dragged down by a drop in investment banking revenue amid slower deal-making activity.
The results came after the financial sector posted its best intraday rally since May on Friday, boosted by a remarkable second-quarter gain from Citigroup ( C ), a day after traders weighed in on disappointing financial results from JPMorgan ( JPM ) and Morgan Stanley (MS).
JPMorgan chief Jamie Dimon warned on Thursday in a call after the reports that risks to the US economy looked “closer than they were before” and said the outlook would depend on “the effectiveness of quantitative easing and flawed, volatile markets.”
Similar commentary is expected from leaders in Corporate America this week, as more companies reveal how their businesses have held up during a rocky past quarter. Not only are the figures expected to reflect weaker earnings, but traders are also bracing for potential downward revisions to guidance as companies outline the impact of rising prices, quantitative tightening and the war in Ukraine on their business outlook.
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“The most important indication of the economy over the next few weeks will be earnings releases as companies report,” Gargi Chaudhuri, head of iShares Americas investment strategy at BlackRock, said in a note.
NEW YORK, NEW YORK – JULY 12: A woman walks near the New York Stock Exchange on July 12, 2022 in New York City. Wall Street returned to declines amid the recession, with the S&P 500 closing 1.2% lower, while tech stocks pushed the Nasdaq down 2.3%. (Photo by John Smith/VIEWpress)
“We will be watching to see if companies are still able to continue to push higher prices for their consumers and which sectors significantly cut their earnings forecasts for the future,” Chaudhuri added. “We’ll also be watching how much recessionary risk is flagged in earnings calls.”
More than 70 companies are scheduled to report results this week. Big tech gains are poised to roll, starting with Netflix ( NFLX ) after the market close on Tuesday, Tesla ( TSLA ) after the bell on Wednesday and Twitter ( TWTR ) ahead of the open on Friday.
Monday’s market moves came after a rally on Friday that saw stocks close sharply higher as Wall Street tried to shake off losses from a tumultuous week triggered by a shock consumer price index in June. Still, the S&P 500, Dow and Nasdaq closed the week lower.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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