Dow drops more than 550 points — tech shares get pummeled

Michael Nagle | Bloomberg | Getty Images

Traders work during the Pivotal Software Inc. initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 20, 2018.

“You’ve got a market that’s getting different tones in conference calls and in the reports,” said Art Hogan, chief market strategist at B. Riley FBR. “When companies are asked what they are worried about, they say rising input costs” from higher rates or commodities. “That comes with no economic benefit.”

Meanwhile, investors also kept an eye on the bond market, with the 10-year note yield trading at highest level since January 2014. The yield broke above 3 percent, a key psychological level, for the first time in more than four years.

Investors have been selling Treasurys this month — pushing yields higher — amid expectations of rising inflation, which could prompt the Federal Reserve to tighten monetary policy at a faster pace.

Investors initially cheered the latest corporate earnings, sending the Dow higher by 131 points at its session high. United Technologies, Verizon and Coca-Cola reported better-than-expected earnings.

“I just think rates are a wet blanket. Plus look at the response to earnings. Look at Google, 3M, Caterpillar was up $6 this morning, and now its down. It’s this violent reaction to earnings,” said Peter Boockvar of Bleakley Financial Group.

“When you get this type of earnings performance it tells you a lot is priced in and people are looking at margins and guidance. When rates rise people have less tolerance for any mistakes. Even the slightest hiccup, or wrinkle is being highlighted in this type of environment,” said Boockvar.

Corporate earnings this season have mostly outperformed analyst expectations thus far. Of the S&P 500 companies that have reported as of Tuesday morning, 83 percent have posted better-than-forecast earnings, according to FactSet.