Wall Street Plunges Amid Earnings Disappointments and Geopolitical Tensions

Strategic Insights -

As the second-quarter earnings report season got underway, the stock market indexes suffered losses of over 1 percent, with tech stocks down nearly 2 percent. The Dow Jones industrial average saw its 11th triple-digit loss of the year, with computer and chip stocks taking a hit after a pessimistic profit forecast from Dell Inc. was issued. Analysts are now forecasting a cloudy profit picture in the third quarter, citing a slowing economy that will impact profit growth.

Key Takeaways:

  • The Dow Jones industrial average suffered its 11th triple-digit loss of the year, with a 1.1 percent decline.
  • Tech stocks were hit hardest, with a 1.9 percent decline due to disappointing earnings from Dell Inc.
  • Computer and chip stocks, including Intel, Hewlett-Packard, Microsoft, and IBM, fell by 4.2 percent, 2.7 percent, 1.8 percent, and 1.3 percent, respectively.
  • Strategists are forecasting a cloudy profit picture in the third quarter, citing a slowing economy that will impact profit growth.
  • The Federal Reserve's decision to raise interest rates to 5.25 percent may lead to a higher recession probability if rates reach 5.75 percent or 6 percent.
  • Wall Street is keeping a wary eye on hostilities on the Israel-Lebanon border and the potential referral of Iran's nuclear enrichment program to the U.N. Security Council.
  • Crude oil futures rose due to reduced crude supplies and geopolitical tensions.

Statistics:

  • The Dow Jones industrial average fell 1.1 percent, with a 1.9 percent decline in tech stocks.
  • Computer and chip stocks fell by 4.2 percent (Intel), 2.7 percent (Hewlett-Packard), 1.8 percent (Microsoft), and 1.3 percent (IBM).
  • The Federal Reserve has raised interest rates 17 times in two years, with the current rate at 5.25 percent.
  • Crude oil futures rose 2.5 percent due to reduced crude supplies and geopolitical tensions.
  • Strategists forecast a cloudy profit picture in the third quarter, with a 10 percent decline in profit growth expected.

Sources:

  • The Atlanta Journal-Constitution, Jul. 13
  • Wachovia Securities chief strategist Rod Smyth
  • McClatchy-Tribune Business News
  • The Permissions Group Inc.