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Dow Futures Plunge as Warren Buffett, Corporate Earnings Spook Markets

Last Updated September 23, 2020 1:55 PM
Sam Bourgi
Last Updated September 23, 2020 1:55 PM
  • Dow Jones futures declined by as much as 362 points Sunday night.
  • Berkshire Hathaway’s annual shareholder meeting has cast a dark shadow over the equities market.
  • Meanwhile, U.S. corporate earnings are heading for their biggest decline since the financial crisis.

Futures on the Dow and broader U.S. stock market declined sharply Sunday evening, setting the stage for a rough start to the week following a grim message from Warren Buffett’s Berkshire Hathaway.

Dow, S&P 500, Nasdaq Futures Tumble

Futures on all three major U.S. stock indexes traded sharply lower Sunday evening. Contracts on the Dow Jones Industrial Average declined by as much as 362 points or 1.5%. S&P 500  and Nasdaq 100 futures were down 1.4% and 1.3%, respectively.

Dow Jones futures
Dow futures point to a volatile start to the week on Monday. | Chart: Yahoo Finance 

Equity markets finished lower last week, mere days after completing their biggest monthly rally in 33 years, as a new flare-up in U.S.-China trade relations put investors on high alert.

Warren Buffett Sets the Stage for Disastrous Week


The brisk futures market selloff comes on the heels of Berkshire Hathaway’s annual shareholder meeting , where investing tycoon Warren Buffett signaled that the worst of the equities downturn might not be over.

Not only did Buffett refuse to buy the March dip, but he also unloaded the company’s entire stake in four U.S. airlines –at a considerable loss, too.

He said:

Our airline position was a mistake… Berkshire is worth less today than if I hadn’t made that decision.

The S&P 500’s airline industry –a component of the Industrials sector–plunged 7.7% on Friday, far worse than the broader market. Berkshire’s latest revelation could send this critical component even lower next week.

S&P 500, Industrials
Airlines plunged 7.7% on Friday compared with 3% for the overall Industrials sector. Over the past 12 months, airlines are down a whopping 58.4%. | Image: Fidelity 

Dismal Earnings Quarter Continues

The stock market’s most considerable recovery since 1987 may be doomed to failure in light of a grim earnings season for Corporate America.

First-quarter earnings are set for their biggest decline since late 2009  because of the coronavirus pandemic. The situation will probably get worse in quarter two as the full impact of a nationwide lockdown becomes known.

Last week, the Department of Commerce said the economy contracted 4.8% annually  in the first quarter, substantially worse than expected. Revised GDP numbers are expected later this month.

S&P 500 companies have posted a blended earnings decline of 15.8% in the first quarter , based on 24% of companies to have reported through April 24. So far, that’s much worse than the 6.8% annual decline analysts had expected.

Hundreds of U.S. companies will report earnings this week, including Walt Disney (NYSE:DIS), Occidental Petroleum (NYSE:OXY), Peloton Interactive (NASDAQ:PTON), General Motors (NYSE:GM), Carnival (NYSE:CCL), Square (NASDAQ:SQ), and T-Mobile (NASDAQ:TMUS).

Disclaimer: The author holds no investment position in the securities mentioned above.