By Yasin Ebrahim
Investing.com – The Dow slumped Tuesday as cyclical stocks were hit hard after rising Covid-19 cases muddied the outlook for global growth, and offset the another wave of mostly bullish corporate earnings.
The Dow Jones Industrial Average fell 1.07%, or 366 points. The S&P 500 fell 0.94%, and the Nasdaq Composite slumped 1.3%.
Investors sweating over the Covid-19 pandemic was widely thought to be in the rearview mirror, but a spike in cases globally has sparked jitters over global growth.
Energy led the broader market to downside, slipping more than 2% as investors reined in bets that global travel would return sooner rather than later to inject life into energy demand at a time when the market is oversupplied.
APA (NASDAQ:APA), Devon Energy (NYSE:DVN) and Occidental Petroleum Corporation (NYSE:OXY) fell more than 5%.
Industrials also played a role in the broader market selloff, paced by a decline in Boeing (NYSE:BA) as sentiment on the aviation sector soured following weaker guidance from United Airlines.
United Airlines guided capacity to be down 45% year-on-year in the second quarter, suggesting that investor optimism for a faster-than-expected snapback in travel was perhaps misplaced.
Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL) and American Airlines Group (NASDAQ:AAL)LL were nursing heavy losses, with the latter down more 6%.
Financials were also on the backfoot, with banks bearing the brunt of the selling exacerbated by a fall in U.S. bond yields. The U.S. 10-year yields slipped to 1.56% down 38 basis points.
Tech stocks struggled to take advantage of the slip in U.S. bond yields, which had kept a lid on growth last month, as investors awaited for quarterly earnings updates from the first cohort of the FANG stocks.
Netflix (NASDAQ:NFLX) is set to report earnings later today after the closing bell. Ahead of its report, analysts appear more constructive amid tough comps for the streaming giant.
Netflix is expected to add about 0.75 million domestic and 5.25 million international streaming subscribers.
Apple (NASDAQ:AAPL) was in focus after its kicking off its first product event for the year. Apple's new iPad product line grabbed most of the attention, with some on Wall Street suggesting that it could spark a wave of demand.
"We estimate less than half of iPad users globally have gone through a refresh the last year with some clear pent-up demand that these new iPads will unleash in the next few quarters thus giving Apple another product tailwind," Wedbush said.
Elsewhere in tech, IBM (NYSE:IBM) shrugged off the selloff as investors cheered big blue's return to quarterly revenue growth.
Johnson & Johnson (NYSE:JNJ) was up 2% after following better-than-expected first-quarter results and reports that some countries had lifted the pause on its Covid-19 vaccine.
Despite the day of red on Wall Street, analysts continued to back the equity bull run, dubbing the selloff a correction.
"So the message here is that yes- the U.S. equities markets are frothy / extended here and thus may be vulnerable to higher volatility ahead; however we are not seeing technical signs that are conducive to prior secular peaks. In other words- brace yourself for a correction, but not the end of the bull market," Janney Montgomery Scott said.