Lackluster Earnings Weigh on U.S. Stock ETFs | ETF Trends

U.S. markets and stock exchange traded funds pulled back as a couple high profile corporate earnings reports came in weaker than previously anticipated, further adding to concerns over the depth of fallout from the coronavirus pandemic.

On Tuesday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 0.2%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) dropped 0.3%, and SPDR S&P 500 ETF (NYSEArca: SPY) was flat.

Dragging on markets, manufacturing conglomerate 3M, fast-food giant McDonald’s, and motorcycle maker Harley-Davidson were among the latest to reveal poor quarterly results, the Wall Street Journal reports.

Investors have been closely watching this earnings season to gauge the impact of the Covid-19 pandemic’s effect on corporate profits and to see how companies will react in this new environment.

“I don’t think the market really cares about second-quarter earnings,” Bob Doll, Chief Equity Strategist and Senior Portfolio Manager at Nuveen, told the WSJ. “I think it really cares about what the future looks like. How will the third quarter compare to the second and what about 2021?”

Meanwhile, investors are also waiting on progress on Capitol Hill as government leaders finalize a new coronavirus relief bill. The previous enhanced unemployment benefits, which some observers argued have helped sustain the economic recovery, is set to expire at the end of the week. Many hope the latest relief bill will maintain some of the enhanced benefits to maintain the recovery process.

“This week, the market focus will be solely on the negotiations between the Republicans and the Democrats,” Wei Li, head of iShares EMEA investment strategy at BlackRock, told the WSJ. “We’re talking about a really tight timeline for them to come through with something.”

Traders will also be watching out for the conclusion of the Federal Reserve’s two-day policy meeting ending Wednesday for clues on the outlook for monetary policy ahead. While many do not believe Fed officials will introduce another round of stimulus measures, investors are watching for signals that the Fed could change its current bond purchasing programs or the Fed’s outlook on near-zero interest rates.

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