Dow Jones drops after weak earnings reports

Wall Street is down after disappointing earnings reports from Caterpillar and Nvidia.

Wall Street sign after Dow Jones down Source: Bloomberg

The Dow Jones has fallen by as much as 200 points after a disappointing earnings report from Caterpillar.

Why is the Dow Jones down?

Wall Street is concerned about the negative earnings reports from construction equipment maker Caterpillar and the chipmaker Nvidia. Both companies attributed losses to declining sales and production in China. The economic slowdown in China is affecting the revenues of many US companies. Quincy Krosby, Prudential Financial chief market strategist, said that companies blaming poor earnings reports on China is a valid reason for concern in the US markets.

‘The one thing with China is it's not a made-up story. It's not like companies are blaming just the Fed or the weather. As we go through the week, if this becomes a theme in many different sectors, it's going to lend urgency to the idea that the global economy is slowing and the need for more stimulus,’ said Krosby.

How did the US government shutdown affect Wall Street?

In addition to economic woes overseas, the US financial state was in disarray during the month-long government shutdown. US President, Donald Trump, and Congress agreed to re-open the government until February 15. The Congressional Budget Office (CBO) reports that $11 billion was lost and economic growth decreased 0.13% because of the gridlock in Washington, D.C. Wells Fargo analysts wrote in a note that another stoppage in three weeks could have a worse impact on the gross domestic product[GDP] of the US.

‘If another extended partial government shutdown should take place after February 15, the direct hit to real GDP growth for the quarter would once again start rising,’ wrote Wells Fargo.

Wall Street hopes that earnings reports this week from Facebook and Amazon will lift up the US stock market.


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