By Shreyashi Sanyal
(Reuters) - U.S. stocks fell on Tuesday in the run-up to third-quarter results from companies as profit expectations drop amid rising interest rates and stubborn inflation, while gains in drugmaker Amgen limited declines on the Dow.
Analysts now expect profit for S&P 500 companies to have risen 4.1% in the third quarter from a year ago, compared with an 11.1% increase expected at the start of July, according to Refinitiv data.
Big U.S. banks are set to report quarterly results on Friday that may offer insight into the health of the U.S. economy.
With recent data on labor market and inflation suggesting more big rate hikes by the U.S. Federal Reserve, Wall Street's main indexes have been on a loss-making streak in the past few sessions on fears of the economy slipping into a recession.
The International Monetary Fund cut its global growth forecast for 2023 and sees U.S. growth this year to be a meager 1.6%, a 0.7 percentage point downgrade from July, reflecting an unexpected second-quarter GDP contraction.
"If we continue to get inflation data that is not showing any signs of slowing, the Fed's not going to lay off, there's no Fed pivot coming," said Dennis Dick, founder and market structure analyst at Triple D Trading Inc.
Money markets are now pricing in a 92% chance of another 75-basis-point hike at the Fed's meeting in November..
Amid rising expectation of another big jump in borrowing costs, the yield on the benchmark 10-year U.S. Treasury note hit a day's high of 4.006%, while growth stocks recorded losses. [US/]
Microsoft Corp (NASDAQ:MSFT), Twitter Inc (NYSE:TWTR), Amazon.com (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL), and Tesla (NASDAQ:TSLA) Inc were down between 1% and 3.5%.
A consumer prices report due on Thursday will offer more clues on inflation, with focus also on minutes from the Fed's September meeting expected later in the week.
"Right now the market wants to see data, show me the numbers, show me we're getting inflation down. Until then, this market is probably stuck in this whole death by a 1,000 cuts scenario," Dick said.
The CBOE Volatility index, also known as Wall Street's fear gauge, rose to 33.57 points, up for a fourth straight session and inching closer to near two-weeks high.
At 9:40 a.m. ET, the Dow Jones Industrial Average was down 57.94 points, or 0.20%, at 29,144.94, the S&P 500 was down 24.75 points, or 0.69%, at 3,587.64 and the Nasdaq Composite was down 92.97 points, or 0.88%, at 10,449.13.
Out of the 11 major S&P 500 sectors indexes, all but the defensive consumer staples fell.
Helping stem losses on the blue-chip Dow, Amgen Inc (NASDAQ:AMGN) shares jumped 4.9% after a report said Morgan Stanley (NYSE:MS) upgraded the drugmaker's stock to "overweight" from "equal weight".
Declining issues outnumbered advancers for a 3.28-to-1 ratio on the NYSE and for a 2.36-to-1 ratio on the Nasdaq. The S&P index recorded no new 52-week high and 71 new lows, while the Nasdaq recorded 10 new highs and 250 new lows.