Dow drops 300 points, gives up earlier 131-point gain

Stocks fell on Tuesday, giving up earlier gains, as investors were left disappointed with the latest batch of earnings while interest rates jumped to levels not seen in years.

The Dow Jones industrial average traded 318 points lower as of 12:37 p.m. ET, with 3M as the worst-performing stock in the index. The S&P 500 fell 0.8 percent, with consumer staples and technology sliding. The Nasdaq composite declined 1.5 percent.

Before the bell, 3M reported quarterly earnings that met analyst expectations, but the stock dropped about 8 percent after the company lowered its full-year profit forecast. Alphabet, meanwhile, topped bottom-line estimates but its stock declined more than 3 percent.

Caterpillar also erased earlier gains, trading 4.3 percent lower.

“Investors have high expectations for earnings,” said Kate Warne, investment strategist at Edward Jones. “At the same time, a lot of people are asking: Does it get better from here?”

“I think that’s why we’re seeing such shifts in the market,” Warne said.

Investors initially cheered the latest corporate earnings, sending the Dow higher by 131 points at its session high. United Technologies, Verizon and Coca-Cola reported better-than-expected earnings.

Nick Raich, CEO of The Earnings Scout said he is still positive on the earnings season, however.

Traders work during the Pivotal Software Inc. initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 20, 2018.

Michael Nagle | Bloomberg | Getty Images
Traders work during the Pivotal Software Inc. initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 20, 2018.

“While there have been some disappointments, they are in the minority,” said Raich in a note. “We are recording the best growth in any quarter since 2010.”

“What we like best about this earnings season is the collective sales growth rate of 10.58% for the companies that have reported,” Raich added. “Additionally, 2Q 2018 estimates are inching higher for companies that have reported so far, and overall 2H 2018 estimates, which many felt were too high, are inching higher.”

Corporate earnings this season have mostly outperformed analyst expectations thus far. Of the S&P 500 companies that have reported as of Tuesday morning, 83 percent have posted better-than-forecast earnings, according to FactSet.

Meanwhile, investors also kept an eye on the bond market, with the 10-year note yield trading at highest level since January 2014. The yield broke above 3 percent, a key psychological level, for the first time in more than four years.

Bank stocks surged after the 10-year yield hit 3 percent. The SPDR S&P Bank ETF (KBE) and Regional Banking ETF (KRE) both rose more about percent. J.P. Morgan Chase, Citigroup, and Bank of America all rose more than 1 percent.

Investors have been selling Treasurys this month — pushing yields higher — amid expectations of rising inflation, which could prompt the Federal Reserve to tighten monetary policy at a faster pace.

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