Nasdaq closes lower Monday as investors prepare for Big Tech earnings: Live updates

Two of the three major indexes were able to post modest gains in Monday's session.

The S&P 500 and Dow ended about 0.1% and 0.2% higher, respectively. But the Nasdaq Composite finished Monday's session about 0.3% lower as investors braced for Big Tech earnings this week.

— Alex Harring

The early earnings season results have showed companies beating a "pretty low bar" and the weakening economic outlook makes the market look uncomfortably pricey, according to Tim Urbanowicz, head of research and investment strategy at Innovator ETFs.

"We're kind of entering this point where we're starting to see what type of damage the hike cycle has already dealt, but we also don't have the inflation cycle in the bag. ... It's very optimistic, the pricing that we're seeing right now, especially with how low volatility is," Urbanowicz said.

This week's earnings slate could provide a wake-up call for markets. Urbanowicz pointed out that tech is the only one of the 11 GICS sectors to have a negative earnings surprise so far.

— Jesse Pound

Stocks may be headed for risky territory despite their performance so far this earnings season, according to Morgan Stanley's Mike Wilson.

To be sure, the chief U.S. equity strategist noted that stocks appear to be holding up well so far this earnings period, trading more in line with fundamentals than over the past several quarters. That's due in part to the fact that stocks have traded well heading into the period instead of selling off as in previous season.

But Wilson warns that that dynamic may be changing.

"This is different than the past few quarters and the beginning of what we think is a reset on expectations for a 2H EPS recovery," he said in a recent note to clients. "The Fed seems determined to fight inflation even if a more significant slowdown arrives."

Consensus expectations among analysts this quarter call for S&P 500 earnings per share growth to decline 9% year-over-year, but improve to a 4% year-over-year decline by the second quarter.

This setup, Wilson said, has held off many investors from selling in to first quarter results, given the belief that the earnings environment has reached its bottom. But Wilson casts doubt on those forecasts.

"We would agree with that conclusion if we believed the consensus forecasts," Wilson said. "Unfortunately, our forecasts are more pessimistic, and we don't expect the trough rate of change EPS growth quarter until 3Q or 4Q."

— Samantha Subin

Though the Federal Reserve policy meeting isn't taking place until next week, Oppenheimer said the knowledge that it's on the horizon can add volatility to the market this week.

"This week with earnings season activity ramping up across a broad array of sectors we expect investors' anticipation of the Federal Reserve's upcoming FOMC meeting in the first week of May to add to the day to day tone and volatility of the markets," said John Stoltzfus, the firm's chief investment strategist.

Many market participants expect the central bank to implement another quarter-percentage point interest rate hike at the next meeting. Investors have been closely watching the Fed amid concerns that its rate hike campaign could now tip the economy into a slowdown or recession.

"A brace of uncertainty remains as an overhang to the markets as to how long the Fed will keep raising rates and whether or not its efforts will push the economy into recession before the current Fed fund hike cycle concludes," Stoltzfus said.

— Alex Harring

Defensive and non-cyclical stocks are becoming favorited as the market senses more pressure to earnings pressure coming amid concerns over long-term rate volatility and the debt ceiling, according to Raymond James.

"Logic would suggest piling into defensive stocks, whose earnings are less impacted by an economic slowing, and guess what, investors are piling into defensive stocks," said Tavis McCourt, managing director of institutional equity strategy, in a note to clients Sunday.

McCourt added that defensive stocks that are considered expensive now will only get more expensive amid further weakening in what he called the "cyclical economy."

— Alex Harring

Bank of America said the resilience of mobile payment company Block's business model is currently underappreciated by investors.

Analyst Jason Kupferberg maintained his buy rating on Block. The bank believes Block shares could rally more than 40% from where shares closed on Friday.

Block shares are up just 2.3% in 2023 after Hindenburg Research released a short seller report on shares on March 23.

"We are bullish on SQ's full-fledge dual-sided ecosystem (Square and Cash App). Shares underperformed in '22 due to macro concerns, but we believe the stock is not being given enough credit for the general resilience the business has shown to date as well as its opex discipline," Kupferberg wrote in a Monday note.

"SQ also doesn't have the 'legacy tech' overhang of some other payment companies, which should make it easier to own. We believe that fundamentals and valuation (including our SOTP analysis) suggest ample upside from here," the analyst added.

— Hakyung Kim

More companies are beating their earnings expectations than usual after many on Wall Street reigned in hopes for the quarter, according to Bank of America. And the firm said they're more rewarded for doing so than in past seasons given investors' apprehension.

About one-quarter of S&P 500 companies have reported earnings as of Friday, which marked the end of the second week of the first-quarter earnings "season."

Strategist Savita Subramaniam said 68% of companies have beat estimates for earnings per share, which is higher than the 63% beat rate seen historically in the first two weeks on the season. Three-quarters, or 75%, beat sales expectations in the first two weeks against the 59% historical average.

Meanwhile, 55% of companies that reported in the first two weeks beat expectations for both earnings per share and sales. That's higher than the historical average of 44% in the same period.

The caution for investors led to higher upsides than normal for those that beat expectations. Companies that surprised to the upside outperformed the S&P 500 in the next trading day by 200 points, a larger beat than the historical average of 150 basis points, Subramaniam said. On the other hand, she said companies that missed expectations got somewhat of a "pass," underperforming the index by 90 basis points in the next session compared with an average gap of 238 basis points.

— Alex Harring

With one of hour of trading left, the three major indexes were showing a mixed performance.

The Dow was up just 28 points, which is less than 0.1%, while the S&P 500 was down less than 0.1% below its flatline. Both have flickered around their respective flatlines over the course of the day.

Meanwhile, the Nasdaq Composite was down 0.3%.

— Alex Harring

The S&P 500 could resort to the lower end of an already tight trading range, according to BTIG chief market technician Jonathan Krinsky.

Recent weeks have seen the benchmark index trade between 4,070 to 4,170, while being stuck in a broader range of 3,800 to 4,200 for the majority of the last 12 months, according to Krinsky.

He says that despite positive factors like a 15-month low for the CBOE Volatility Index (VIX), momentum is starting to slow as the seemingly bullish season wanes.

"We think resolution to the small range comes this week with ~20% of SPX components reporting earnings. Ultimately, we continue to expect the bigger range to break lower (sub 3800)," Krinsky said.

The index closed Friday's session at 4,133.52.

— Brian Evans

C3.ai tumbled 10% following a downgrade from Wolfe Research.

Analyst Joshua Tilton said in a Sunday note that the the firm is "skeptical" that the company can "hit its FY24 targets and are not willing to underwrite material revenue uplift from its planned transition to a consumption model."

Read more on the downgrade from Wolfe Research here.

— Samantha Subin

Alphabet, Microsoft, Meta Platforms and Amazon are reporting earnings this week. All of them are holdings in the portfolio of the CNBC Investing Club with Jim Cramer. The Club is anticipating a tough quarter with pockets of resiliency.

While profits are expected to be pressured by a slower economy, there are several key themes, including online advertising and cloud, to watch that could have huge potential to shape longer-term growth.

Investing Club members can read the full story here.

Chipotle shares still have a bit more upside even after soaring more than 30% in 2023, according to Bernstein.

The firm says the fast-casual food company could see 6% upside, even as the stock faces increasing pressure as to whether it can sustain its rally. Chipotle was previously chosen as a top pick for 2023 by Bernstein analysts.

"We believe that the success of Chicken-Al-Pastor, the Freepotle initiative and the underappreciated resilience of Chipotle in soft macro environments will support traffic growth in the near term, while we expect throughput improvements, more personalizations and growth of loyalty program users to offer long-term traffic ta