Dow Futures Plunge Because Earnings Are Even Worse Than Expected

Trader Joseph Lawler works on the floor of the New York Stock Exchange at the closing bell, Thursday, Dec. 27, 2018. U.S. stocks staged a furious late-afternoon rally Thursday, closing with gains after erasing a 600-point drop in the Dow Jones Industrial Average. (AP Photo/Richard Drew)

Dow futures fell on Thursday as corporate earnings continue to disappoint Wall Street. Even with expectations at 13-year lows, blue-chip US companies are failing to hit the mark.

IBM was the biggest drag on the Dow Jones Industrial Average on Thursday, falling 1 percent in pre-market trading. The tech company reporting year-on-year revenue losses. Poor results at Netflix also dragged down investor sentiment across the global stock markets.

Dow looks to extend losses

All signs point to a weak stock market open on Thursday, extending heavy losses for the US stock market. As of 5.42 am EST, Dow Jones Industrial Average (DJIA) futures traded 61 points lower at 27,170.

S&P 500 futures followed the Dow’s decline, falling 3.75 points in early trading. Weighed down by Netflix’s plunge, the tech-heavy Nasdaq Composite futures market fell 17.5 points to 7,868.

Earnings recession weighs on stock market

Traders anticipate a brutal earnings season, with the Financial Times predicting an “earnings recession,” a technical event that occurs on back-to-back quarters of negative earnings growth.

As results trickle in, the reality is hitting hard.

Netflix stock plunged 10 percent in after-hours trading Wednesday after dramatically missing the mark on subscriber growth. 

IBM beat expectations, but the stock still plunged 1.3 percent overnight as revenue remains down year-on-year. It shows there is absolutely no room for error this earnings season. The market is priced to perfection.

The results are even worse in Europe. SAP, one of Europe’s biggest cloud companies, fell 10 percent as profits came in below expectations. Major online retailer ASOS plunged 15 percent after missing profit expectations and slashing 2019 targets. 

Even the Wall Street banks, which beat expectations across the board, warned on future profits. JP Morgan lowered its 2019 guidance for income on interest. With the Fed intent on lowering interest rates, the banks will face difficulty.

Money managers take profit on stocks

As previously reported, major hedge funds and money managers have started to pull money out of global stocks. Deutsche Bank is the latest to join the exodus.

Global Chief Investment Officer Christian Nolting, who oversees $338 billion assets, confirmed that his firm has reduced exposure to equities from 50 percent to 40 percent. He cited the poor corporate earnings backdrop and the looming trade war fears.

“We are still in profit-taking mode.”

Click here for a real-time Dow Jones Industrial Average price chart.

Last modified: September 23, 2020 12:50 PM

Ben Brown: Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at Twitter at _Ben_Brown. Email ben @