When Goldman Sachs Group Inc. Chief U.S. Equity Strategist David Kostin puts on his macro goggles, he sees a disappointing third-quarter earnings season ahead.
"Variables that determine earnings surprises – changes in U.S. economic growth, interest rates, oil price, the dollar, and EPS [earnings per share] revisions – suggest a below-average share of firms will report positive earnings per share surprises (43 percent vs. 46 percent)," he writes in a note to clients. " We see a weak third-quarter reporting season coupled with negative fourth-quarter EPS revisions pushing stocks 2 percent lower to our year- end target of 2,100."
Slumping crude prices and a dour start to Wall Street's corporate earnings season pulled down U.S. and European equities on Tuesday, while the dollar hit an eight-month high on increasing bets U.S. interest rates will rise in December.
Wall Street fell more than 1 percent as shares of aluminum producer Alcoa (AA.N) and diagnostics test maker Illumina (ILMN.O) plunged, with worries over the make-up of the U.S. Congress after November's election also weighing on stocks.
The Dow Jones industrial average .DJI closed down 200.38 points, or 1.09 percent, to 18,128.66. The S&P 500 .SPX fell 26.93 points, or 1.24 percent, to 2,136.73 and the Nasdaq Composite .IXIC lost 81.89 points, or 1.54 percent, to 5,246.79.
Asian stocks headed for a fourth day of declines after U.S. markets slumped on disappointing earnings, volatility spiked, and a stronger yen weighed on Japanese shares.
The MSCI Asia Pacific Index lost 0.4 percent to 139.25 as of 9:08 a.m. in Tokyo, while Japan’s Topix index sank 0.7 percent.
Reference: Reuters, Bloomberg
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