ASX set for sharp falls as Wall Street slide continues

Stocks were down in afternoon trading on Tuesday (US time), giving up more of their recent gains as investors weighed the latest batch of company earnings reports for clues about the health of Corporate America.

In late trade, the S&P 500 index was down 0.8 per cent, the Dow Jones has lost 0.9 per cent and the technology-heavy Nasdaq has slid by 1.1 per cent after shedding an early gain. It sets up the Australian sharemarket for falls, with futures at 5.11am AEST pointing to a fall of 69 points, or 1 per cent, at the open for the ASX.

Wall Street has recorded another day of falls.Credit:AP

Bond yields fell and weighed down banks, which rely on higher yields to charge more lucrative interest on loans. The yield on the 10-year Treasury fell to 1.56 per cent from 1.60 per cent. Bank of America fell 3 per cent and Citigroup dropped 3.7 per cent.

Technology stocks accounted for the biggest share of the decline in stocks, putting more pressure on the broader market. Apple fell 1.7 per cent.

The broader market took a more defensive posture as utilities, real estate stocks and a mix of companies that make consumer staples like food and household products gained ground. General Mills rose 1.5 per cent and Clorox rose 2.8 per cent.

The Russell 2000 index of smaller company stocks, which has been outpacing the broader market all year, was taking the brunt of the losses, shedding 2.4 per cent.

The market has been swaying between gains and record highs to pullbacks as investors weigh solid economic growth against the risks still posed by the virus pandemic. That push and pull will likely continue as vaccine distribution rolls on and various industries reopen.

“Overall, we’re going to have some volatility in the market this year, but everything to me looks fairly rosy for the next six months or so,” said Sylvia Jablonski, chief investment officer at Defiance ETFs.

Investors are in the middle of first-quarter earnings season. Roughly 80 members of the S&P 500 will report their results this week, as well as one out of every three members of the Dow. Wall Street will be looking to see if Corporate America is recovering with the rest of the economy from the coronavirus pandemic.

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