Stocks finished lower Tuesday as investors were cautious heading into the third-quarter earnings season with a focus on the combined impact of surging energy and faster inflation.
The Dow Jones Industrial Average finished down 117 points, 0.34% to 34,378, while the S&P 500 was off 0.24% and the tech-heavy Nasdaq slipped 0.14%.
The International Monetary Fund cut its global growth forecast by 10 basis points, to 5.9%, in what it called a "modest headline revision that masks large downgrades for some countries" but also "reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions."
Investors were also unsettled by news that indebted China property giant Evergrande had missed a third series coupon payment in as many weeks, reigniting concerns that its collapse could trigger contagion in regional bond markets.
Collective S&P 500 profits are expected to rise 29.6% from last year to around $413.8 billion, according to forecasts from Refinitiv. The energy sector is expected to lead gains over Q3, with profits rising by nearly 1,500% from last year to around $20.5 billion.
"The main thing that continues to frustrate investors is inflation," said Louis Navellier, chairman and founder of Navellier & Associates. "The bottom line is that the U.S. economy remains an oasis compared to other world markets. This is one reason why the U.S. dollar is near a one-year high."
Not only does the U.S. have positive economic growth, he added, "but we also have higher interest rates and continue to attract foreign capital, which may keep Treasury yields artificially low."
September CPI data looms large on Wednesday as the market's preferred inflation gauge, the so-called 5-year/5-year breakeven rate, is trading at the highest levels since June and Federal Reserve rate hike bets for September 2022 continue to accelerate.
JPMorgan (JPM) - Get JPMorgan Chase & Co. (JPM) Report, Citigroup (C) - Get Citigroup Inc. Report and Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report are scheduled to kick off the third quarter earnings season on Wednesday.
Tesla (TSLA) - Get Tesla Inc Report rose to a seven-month high after after the carmaker defied a sharp slowdown in China to record its best-ever September sales tally from the world's biggest car market.
MGM Resorts International (MGM) - Get MGM Resorts International (MGM) Report shares jumped after analysts at Credit Suisse boosted their rating on the gaming company and its U.K.-based partner posted stronger-than-expected third quarter revenues.
WTI futures for November delivery were flat at $80.52 per barrel while Brent contracts for December, the global pricing benchmark, were down marginally at $83.27 per barrel.