It might be a big World Cup day, but in the stock market it’s “World Slump” day.
Here are the key talking points:
1. Bad day for stocks: All three major U.S. indexes are retreating with the Nasdaq down a whopping 1.7%. The Dow Jones Industrial Average lost 140 points (0.8%) and the S&P 500 is off 0.8%. There was a lot of excitement about the Dow cresting over 17,000 last week, but it’s now trading below 16,900..
Meanwhile volatility is creeping back into the market. CNNMoney’s Fear and Greed Index, which tracks seven indicators of market sentiment, has moved from “extreme greed” into “greed.”
Some of the pessimism could simply be investors realizing their gains after the recent stock market rally. But there are deeper concerns about company valuations and whether the Federal Reserve will raise interest rates sooner rather than later.
2. Tech takes beating: Tuesday’s selloff was most pronounced in the tech world, where some of big so-called momentum stocks were pulling back. CNNMoney’s Tech 30 Index down roughly 2%, with Twitter as its most unfortunate victim. Shares of the microblogging service tanked over 7.5% Tuesday.
“$TWTR is done. Take the money and run very fast,” said MickeTrader on StockTwits.
Linkedin and Facebook were also losing big. Those stocks were down 6% and 4% respectively.
3. Earnings season is here! Aluminum producer Alcoa is scheduled to unveil its earnings after the closing bell, marking the start of the quarterly results season. Restaurant chain Bob Evans is also due to report after the close.
With the S&P 500 index already up 6% this year, investors will be looking closely to see whether corporate profits can support stocks and to what extent markets have been relying on cheap money from the Federal Reserve to push indexes to new records.
Second quarter earnings are expected to grow 4.9% compared to the same period last year, though that estimate is down from the 6.8% prediction at the start of the quarter, according to data from FactSet.
4. Other movers: More drama at American Apparel: Shares of American Apparel plunged after the struggling company warned it received a notice of default from a lender related to last month’s ouster of founder and CEO Dov Charney.
However, American Apparel disputed that default claim and is exploring ways to tap its revolving credit facility to repay the lender. The New York Post reported American Apparel has reached a preliminary deal to transfer control of the board to a hedge fund aligned with Charney.
Also on the fashion front, Guess rallied after the retailer was upgraded by analysts at Piper Jaffray, who pointed to strength in the company’s European business.
5. No help from overseas: European markets were weaker, with airline and banking stocks under pressure. Air France KLM cut its earnings forecast due to overcapacity on routes to North America and Asia. The major U.S. airlines, including Delta Air Lines, United Continental, and American Airlines Group, all dove.
Some bank stocks took a hit from a New York Times report saying Germany’s Commerzbank and Deutsche Bank are next in line for punishment by U.S. authorities. Sentiment was also soured by weaker than expected German export data for May.
Asian markets ended mixed.
South Korean-based Samsung warned that revenue and profit will fall in the second quarter as the company struggles to find new smartphone buyers in an already saturated market. The electronics maker warned that operating profit could fall to 7 trillion won ($6.9 billion) — a 26% decline from the previous year.
