Supply chain problems and higher costs for energy and other things have fueled concern about earnings, set to kick off with JPMorgan Chase & Co. results on Wednesday.
Indexes reversed early gains after midday and added to losses just before the close. JPMorgan shares were down 2.1 percent and among the biggest drags on the S&P 500 along with Amazon.com, which fell 1.3 percent. The S&P financial index was down 1 percent, while communication services dropped 1.5 percent.
“The market is a bit cautious going into this earnings season,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “Supply chain issues may have impacted earnings for a number of companies and certain industries more than others.”
While another period of strong U.S. profit growth is forecast for Corporate America, earnings are shaping up to be crucial for investors worried about how supply disruptions and inflation pressures will affect bottom lines.
That could lead to more volatility on Wall Street following a bruising September. Analysts expect a 29.6 percent year-over-year increase in profit for S&P 500 companies in the third quarter, according to IBES data from Refinitiv as of Friday.
The Dow Jones Industrial Average fell 250.19 points, or 0.72 percent, to 34,496.06, the S&P 500 lost 30.15 points, or 0.69 percent, to 4,361.19 and the Nasdaq Composite dropped 93.34 points, or 0.64 percent, to 14,486.20.
The energy sector also ended lower after hitting its highest since January 2020 earlier in the day. Higher oil prices have fed into concerns about rising costs for businesses and consumers.
S&P 500 vs Energy
Analysts do expect some positive earnings news. “If you’re a larger company, you’re able to mitigate a lot of these issues,” said Christopher Harvey, head of equity strategy at Wells Fargo Securities in New York.
Managements “have been very cognizant of their budgets and not sacrificing margins.” Plus, demand remains strong, he said.
Visa Inc. was down 2.2 percent and Mastercard Inc. also fell 2.2 percent among the biggest drags on the S&P 500.
Volume on U.S. exchanges was 8.15 billion shares, compared with the 10.9 billion average for the full session over the last 20 trading days.
Trading may have been slower due to the U.S. federal holiday Monday, with U.S. bond markets shut for the day.
Among individual stocks, Southwest Airlines Co fell 4.2 percent on a report that it canceled at least 30 percent of scheduled flights on Sunday.
By Caroline Valetkevitch