By Joy Wiltermuth and William Watts
“Earnings are coming out and they are really strong, even though companies are facing tough comps,” said Max Wasserman, founder and senior portfolio manager at Miramar Capital, near Chicago.
“The problem is on the macro side,” Wasserman said by phone, while pointing to supply-chain bottlenecks, high inflation, uncertainty about whether the Federal Reserve can tighten financial conditions without unleashing a recession and Russia’s war in Ukraine.
Given the tougher backdrop, he expects choppy markets for at least the next three months as the Fed looks to get inflation under control. He also sees the potential for another 5% to 10% drawdown for the S&P 500 over that stretch, as markets adjust to likely higher interest rates.
See: Fed’s half-percentage-point interest rate hike next week seen baked in the cake
The yen /zigman2/quotes/210561789/realtime/sampled USDJPY +0.1822% meanwhile slumped to a fresh 20-decade low after the Bank of Japan didn’t alter its easy monetary policy stance.
See : Dollar domination continues, as yen slumps to two-decade low
Which companies were in focus?
Shares of Teladoc Health Inc. /zigman2/quotes/207420252/composite TDOC +2.73% tumbled 40.2% after the telemedicine company cut its full-year outlook .
McDonald’s Corp. /zigman2/quotes/203508018/composite MCD +1.24% shares rose 2.9% after beating expectations on earnings and revenue .
Merck /zigman2/quotes/209956077/composite MRK +1.43% shares gained 4.9% after the drug company topped estimates for the first quarter, buoyed by more than $3 billion in sales of its COVID-19 antiviral.
Shares of Southwest Airlines /zigman2/quotes/201071949/composite LUV +3.30% climbed 2.1% after the air carrier reported a wider-than-expected first-quarter loss but revenue that beat expectations , amid a “sharp rebound” in March.
Caterpillar /zigman2/quotes/203434128/composite CAT +8.40% fell 0.7% after the maker of construction and mining equipment blew past estimates for the first quarter.
The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.68% rose 4.5 basis points to 2.862%. Yields and debt prices move opposite each other.
Oil futures pushed higher, with the U.S. benchmark /zigman2/quotes/211629951/delayed CL.1 +1.10% up 3.3% to close at $105.36 a barrel. Gold futures /zigman2/quotes/210034565/delayed GC00 -0.41% edged 0.1% higher to close at $1,891.30 an ounce.
Bitcoin /zigman2/quotes/31322028/realtime BTCUSD -0.78% rose 2.3% to trade near $40,000.
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +1.51% rose 0.6%, while London’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.56% advanced 1.1%.
The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +0.10% rose 0.6%, while the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.29% in Hong Kong rose 1.7% and Japan’s Nikkei 225 /zigman2/quotes/210597971/delayed JP:NIK +1.63% advanced 1.8%.
— Steve Goldstein contributed reporting