US STOCKS-Wall St benchmarks drop 2% on weak earnings, rate hike worries
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* Schlumberger (SLB) gains on higher first-quarter profit
* Gap falls after cutting quarterly sales forecast
* Indexes down: Dow 2.13%, S&P 2.18%, Nasdaq 2.1% (New throughout, updates prices to early afternoon)
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The latest earnings forecasts to jolt investors came from healthcare, with HCA Healthcare (HCA) and Intuitive Surgical Inc (ISRG) the worst performers on the S&P 500 in early-afternoon trading.
HCA slumped 19% after reporting a downbeat profit view, while other hospital operators felt the contagion: Tenet Healthcare (THC), Community Health Systems (CYH) and Universal Health Services (UHS) fell between 12.9% and 18.8%.
Surgical robot maker Intuitive Surgical (ISRG) dropped 13.5% after it warned of weaker demand from hospitals due to tighter finances.
All 11 major S&P 500 sectors were lower, although healthcare was not the industry suffering the most.
That misfortune fell to materials, which was weighed by Nucor Corp (NUE) - down 8.3% after hitting a record high after posting earnings on Thursday - and Freeport-McMoRan Inc (FCX), which slipped 7% as investors fretted over how interest rate hikes would impact copper miners.
Concerns about risks from interest rate hikes continued to
reverberate after Federal Reserve Chair
The idea of "front-end loading" the U.S. central bank's retreat from super-easy monetary policy, which Powell articulated support for on Thursday, has also forced traders to re-evaluate how aggressive subsequent rate rises would be.
"The rate environment is not going away. COVID is not going
to disappear overnight. Earnings are going to be affected by
these issues," said
"So we have a cauldron brewing with ingredients that make for a dangerous combination."
The CBOE Volatility index, also known as
The prospect of a more hawkish Fed has led to a rocky start to the year for equities, in particular tech and growth shares whose valuations are more vulnerable to rising bond yields.
Earnings are due next week for the four biggest U.S. companies by market capitalization: Apple (AAPL), Microsoft (MSFT) , Amazon (AMZN) and Google parent Alphabet.
The quartet, as well as Meta Platforms Inc (FB), which also has results on deck for next week, suffered a sell-off on Friday, dropping between 1.7% and 4.4%.
Investors are worried after streaming giant Netflix Inc's (NFLX) dismal earnings earlier this week sent shockwaves through big tech and stay-at-home darlings which benefited from pandemic factors such as lockdown measures.
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All the three main indexes were on course to end the week lower.
Adding to inflation worries, U.S. business activity slowed in April as soaring costs for raw materials, fuel and labor pushed input prices to a record high, a survey by S&P Global showed.
Among other companies that reported results, Gap Inc (GPS) tumbled 18.9% after the apparel company cut its forecast for quarterly sales, blaming execution challenges at its Old Navy brand and "macro-economic dynamics".
Verizon Communications Inc (VZ) fell 5.9% after disappointing full-year earnings forecast.
However, Schlumberger NV (SLB) gained 3.8% after reporting
a higher first-quarter profit, as rising oil prices due to