The stock market resumed losses Monday morning after briefly trading higher as investors awaited Wednesday's Federal Reserve rate decision. Health care, real estate and energy were among the worst-performing sectors.
The Nasdaq composite is trading 0.3% lower at noon EDT while the Dow Jones Industrial Average has fallen 0.1%. The S&P 500 is down 0.2%.
The small-cap Russell 2000 index shows similar price action, down 0.2%.
Volume has fallen on the Nasdaq and the NYSE vs. the same time on Friday.
Stock Market Struggling At Lows
The Nasdaq has now fallen in four of the past five weeks but is approaching oversold technical conditions that could attract dip buyers.
As Friday's Big Picture commented: "Since getting turned away near its 200-day moving average, the index has swan-dived below all its main moving averages. It is now down nearly 28% so far in 2022."
The S&P 500 also fell last week in above-average volume and now sits 5.5% below its 50-day moving average.
Contrarily speaking, this isn't a terrible setup for short-term bulls ahead of this week's market-moving rate decision. Even so, it's best to wait for setups to hit proper buy points before considering entries.
Another Week Of Losses On Tap?
Analysts have cut their estimates for third-quarter earnings growth by 5.5% since June 30, according to John Butters, senior earnings analyst at FactSet. That would mark the biggest earnings decline since the second quarter of 2020.
Markets have already written off a 75-basis-point hike as an inflation-fighting measure when the Federal Reserve meets this week. Investors now see an 80% chance of a 75-basis-point hike vs. a 20% likelihood the Fed will boost rates by a full percentage point, according to the Cboe's Fed Watch tracking tool.
Yield on the 10-year U.S. Treasury note rose three basis points to 3.49% in the first hour of the U.S. equity session.
U.S. crude oil has fallen over 2% and is trading at $83.80 per barrel. Overnight, oil prices were near their lowest level since January.
The S&P Energy Select Sector ETF has lost 1.7% while the S&P Health Care Sector ETF is down 2.1%.
Real estate stocks have also declined sharply, although KB Home erased earlier declines of 3% to trade higher 2.9%. The homebuilder releases earnings on Wednesday.
The National Association of Home Builders index declined to 46 in September from 49 in August and below the Econoday consensus of 48 as housing demand dries up.
"The housing market likely has more downside to go as the Fed continues to tighten monetary policy," said Jeffrey Roach, chief economist for LPL Financial. "Rising mortgage rates will likely hamper demand for the rest of this year. Tight labor markets and high construction costs weigh heavily on homebuilders right now. Both supply and demand factors will likely suppress residential real estate for the rest of 2022."
European and Asian markets traded mixed on Monday. The London FTSE 100 fell 0.6%, but the German DAX and the French CAC 40 gained. In Asia, the Nikkei 225 was down 1.1%, the Hang Seng 1% and the Shanghai index 0.4%.
Bitcoin dumped nearly 3% but is now holding around $19,000.
Stock Market Cautious On Recession Fears
The Innovator IBD 50 ETF was down 0.7%.
AutoZone topped earnings estimates for its fiscal fourth quarter, as the aftermarket auto repair giant posted solid profit and sales growth, bucking recent bearish industry trends. AZO stock fell 2.5% and dropped out of its buy zone, which it entered on June 24 from a cup with handle.
Apple traded up 0.7%, while Microsoft was down 1.6%. Tesla was up 0.8% ahead of the Fed.
Key earnings reports this week include Costco, Darden Restaurants, General Mills and Lennar.
Follow Michael Molinski on Twitter @IMmolinski
