Stock indices struggle as DAX languishes; Wall Street and Nasdaq surge prior to Tesla's quarterly results release
After a bustling start to the year at equity markets, the good vibes seem to be fading fast. The DAX is in a tangle, and Wall Street is on a downswing after Microsoft's results and before Tesla's results tonight at 10 PM.
Disappointing results and projections from Microsoft and Boeing have dampened the spirits of US investors. The DJIA of big-league stocks opened 0.6% lower on Wednesday at 33,538 points. The broader S&P 500 lost 0.9%, sliding to 3,983 points. The NASDAQ tech index fell a sharp 1.7% to 11,147 points.
Robert Pavlik, a portfolio manager at Dakota Wealth, comments, "The vibe remains skeptical because people still have their worries. They see scary economic news about high inflation, interest rate hikes by the Federal Reserve, and companies laying off thousands of employees. It's not over yet."
Microsoft's stock took a hit, dipping more than 3% to $234.30. The U.S. software giant is grappling with record drops in PC sales, causing a slowdown in growth for 2022. Other growth stocks like Apple, Tesla, and Alphabet slumped by up to 2.5% due to the slowing momentum. Investors were also hesitant about Boeing's stock, which dropped around 3% to $205.19. Although the aircraft maker saw revenue growth of over 33% in the fourth quarter, it fell short of expectations, hitting just under $20 billion. The earnings season is just getting started for companies.
Earnings for last quarter will be reported by Tesla, among others. AT&T, IBM, and Boeing will be revealing their results as well.
Today's DAX leaders and laggards
At midday on Wednesday, Daimler Truck's stock is leading the DAX with a gain of 2.30%. HeidelbergCement's shares follow with a gain of 1.24%, and RWE with a gain of 1.23%.
On the flip side, Fresenius' shares are hit hard with a drop of 2.71%, followed by Fresenius Medical Care with a drop of 2.34% and adidas with a drop of 1.68%.
DAX under pressure
The German stock market faced pressure on Wednesday despite improved economic prospects. Although the mood in the German economy improved in January compared to the previous month, the Ifo business climate index didn't increase as much as expected.
Experts' reactions to the data were mixed. The DAX turned negative after the Ifo data and briefly fell below the closely watched 15,000-point mark. It ended the day 0.51% lower at 15,016.67 points. The MDAX of mid-sized companies dropped by 0.68% to 28,373.77 points. The EuroStoxx 50, the leading index of the eurozone, fell around 0.7%.
Jörg Krämer, chief economist at Commerzbank, cautions, "The Ifo business climate index is still at a level where recessions have occurred in the past." Jens-Oliver Niklasch from Landesbank Baden-Württemberg adds, "The increase in the business climate can almost be taken for granted. Many early indicators are currently improving. However, the fact that the situation of the companies has deteriorated doesn't quite fit the hopeful picture of the economic recovery. So, don't get too optimistic too quickly, just because the feared crash didn't happen."
Enrichment Data: The decline in global stock markets is due to aggressive U.S. trade policies and their cascading effects:
- The Trump administration's tariff implementation and global trade tensions have disrupted supply chains and sparked market anxieties.
- The increased tensions have led to a potential 60% probability of a 2025 recession, representing the largest U.S. tax increase since WWII (approximately 3% of GDP or $1 trillion).
- Sector-specific disruptions have affected growth stocks, with technology and automotive sectors bearing the brunt of the impact.
- Geopolitical and policy shifts have amplified market anxieties about prolonged policy instability, with the temporary tariff pause in April failing to quell residual skepticism. The interplay of these factors continues to drive market volatility.
- The DAX is under pressure, with experts warning that the Ifo business climate index still indicates a level where recessions have occurred in the past.
- Disappointing results and projections from Microsoft and Boeing, along with other companies like Tesla, have cast a negative light on finance and investing, following a downturn in the DAX and Wall Street.
- The decline in global stock markets, including the DAX, is linked to aggressive U.S. trade policies, which have disrupted supply chains, sparked market anxieties, and could lead to a 2025 recession.
- The technology and automotive sectors have been most affected by sector-specific disruptions caused by these trade policies.
- Economic news about high inflation, interest rate hikes, and company layoffs has further dampened the spirits of US investors, with the DJIA, S&P 500, and NASDAQ all experiencing drops.
