US stocks dropped sharply with Caterpillar and Microsoft shares dropping after quarterly results, while the unexpected deadline in orders for durable goods weighed on the sentiment.
According to The Wall Street Journal the Dow Jones Industrial Average declined 1.9% or 343 points to 17,333 and the S&P 500 dropped 1.4% or 29 points to 2,028. The Nasdaq Composite declined 1.7% or 82 points to 4,689.
Microsoft and Caterpillar contributed around 67 points to the total decline of the Dow. Microsoft shares dropped 8.8% after the company set its financial outlook for the fiscal year, ending June, below the estimates of Wall Street, citing a strong dollar.
Caterpillar’s 2105 outlook was disappointing, citing tumbling coal, copper and oil prices and reported Q4 earnings that missed estimates. Sales have also been hurt by the stronger dollar. The shares dropped 7.5%.
Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management was quoted by Reuters as having said, “US equities could come under pressure as investors ratchet down their growth estimates for the US economy. There was just too much hype about the US economy having risen into a new and higher growth channel. We’re still stumbling along.”
United Technologies Corp cut its profit and sales forecasts fro 2015, blaming the strength of the dollar. The company said that 62% of its sales were overseas, leaving it exposed to sudden change in the value of the US dollar. The shares dropped 1.2%.
On Tuesday, Procter & Gamble Co. said that it expects currency volatility to reduce its 2015 profit by 12% and sales by 5%.
The Federal Reserve commences its two-day monetary policy meeting on Tuesday and is scheduled to release a statement on Wednesday.
Kent Engelke, chief economic strategist at Capitol Securities Management Inc said, “If the Fed raises rates, the dollar should continue to rally, and that will impact profits negatively.”
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