By Sinéad Carew, Sruthi Shankar and Ankika Biswas
(Reuters) - The Nasdaq closed lower on Monday, underperforming the S&P 500 and the Dow, with pressure from high-profile megacaps as investors awaited results from companies including Microsoft while Tesla (NASDAQ:TSLA) shares fell on concerns about its spending plans.
Tesla Inc finished down 1.5% after the automaker raised its 2023 capital expenditure forecast to ramp up output, making it the second biggest drag on the benchmark S&P 500 behind Microsoft Corp (NASDAQ:MSFT).
Shares in Microsoft, up more than 17% so far this year, were under pressure Monday as investors appeared anxious about its results, due out on Tuesday. Another heavyweight laggard was Amazon.com Inc (NASDAQ:AMZN), which is on deck to report this week along with Alphabet (NASDAQ:GOOGL) Inc, and Meta Platforms Inc (NASDAQ:META).
A rally in these stocks has supported Wall Street this year, so investors are worried about whether the gains can continue given the gloomy economic outlook.
"People are a little tentative that the outperformance may not continue in earnings season, which thus far has been quite a bit better than expected. Granted the bar was low," said Randy Frederick, managing director, trading and derivatives at Charles Schwab (NYSE:SCHW) in Austin, Texas.
Frederick also pointed to anxiety about upcoming economic data such as first-quarter growth and inflation readings.
Graphic: US megapcap stocks recover somewhat after 2022 collapse - https://fingfx.thomsonreuters.com/gfx/mkt/znvnbnzzjvl/Pasted%20image%201682351277578.png
The Dow Jones Industrial Average rose 66.44 points, or 0.2%, to 33,875.4 while the S&P 500 gained 3.52 points, or 0.09%, at 4,137.04. The Nasdaq Composite dropped 35.25 points, or 0.29%, to 12,037.20.
Among the S&P 500's 11 major sectors, energy was the strongest, rising 1.5%, while technology was the weakest, down 0.4%.
Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, said the Philadelphia semiconductor index, which closed down 0.5%, was likely underperforming due to increasing global tensions with China.
U.S. stocks have largely held steady through the start of the earnings season on stronger-than-expected results from big banks, allaying concerns about a contagion from the regional banking crisis in March.
Of the 90 S&P 500 companies that have reported first-quarter results so far, nearly 77% have topped analysts' estimates compared with the long-term average beat rate of 66%, as per Refinitiv IBES data.
Early readings of first-quarter U.S. GDP, personal consumer expenditure index (PCE) for March, and April consumer confidence are among the data scheduled for release this week.
Mixed data last week cemented bets of a 25-basis-point rate hike by the Federal Reserve in May, with money market traders pricing in a 92% chance of such a move, according to CME Group's (NASDAQ:CME) Fedwatch tool. Fed policymakers said in the past week that the central bank has more work to do to bring down inflation.
U.S. Treasury yields eased following recent signs of slowing inflation and economic activity, though investors appeared increasingly concerned about a government spending stand-off and the potential for the United States to hit its debt ceiling sooner than expected. [US/]
U.S. House of Representatives Speaker Kevin McCarthy said the House would vote on his spending and debt bill this week.
Amazon fell 0.7% while Meta pared earlier losses to close off just 0.04%. Google's parent Alphabet managed a 0.5% gain. AT&T Inc (NYSE:T), which reported disappointing results on Thursday, deepened last week's losses with a 3.8% drop on Monday.
Also dragging on the S&P 500 was air conditioner maker Carrier Global (NYSE:CARR) Corp, which closed down 7.3%, after reports, citing unidentified sources, said it was in advanced talks to acquire German industrial manufacturer Viessmann for more than $12 billion including debt.
In the penny-stock department, shares in once-popular home goods retailer Bed Bath & Beyond (NASDAQ:BBBY) tumbled 35.7% to 19 cents after it declared bankruptcy on Sunday. Retail rivals including Target Corp (NYSE:TGT) and Walmart (NYSE:WMT) Inc gained 1.1% and 0.7% respectively on Monday.
After closing up 12.2%, First Republic Bank (NYSE:FRC) shares lost ground in after-the-bell trading following the closely watched regional bank's quarterly report, which showed its deposits fell 41% in the first quarter.
The stock was last down almost 87% year-to-date as the U.S. banking crisis sent investors to the exits.
Advancing issues outnumbered decliners on the NYSE by a 1.32-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.
The S&P 500 posted 21 new 52-week highs and two new lows; the Nasdaq Composite recorded 64 new highs and 201 new lows.
On U.S. exchanges 9.54 billion shares changed hands compared with the 10.30 billion average for the last 20 sessions.