These 2 Stocks Are Canaries in the Market Coal Mine

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The stock market has fallen sharply in recent weeks, and the new month got off to a negative start. Fears about geopolitical and macroeconomic concerns continued to weigh on investor sentiment, as the Federal Reserve prepares to decide on how aggressive it will be with monetary policy later this week. As of 2:15 p.m. ET, the Dow Jones Industrial Average (^DJI 0.26%) was down 435 points to 32,543. The S&P 500 (^GSPC 0.57%) dropped 58 points to 4,074, while the Nasdaq Composite (^IXIC 1.63%) was off by 104 points to 12,231.

A couple of companies in the financial industry reported earnings this morning, and both stocks fell after the report. The fact that Global Payments (GPN -9.21%) and Moody’s (MCO -4.85%) are at very different ends of the sector shows that the weakness in the financial markets spans well beyond any single asset class. Below, we’ll look more closely at why these two stocks fell and what that means for the broader market.

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Global Payments falls short

Shares of Global Payments were down more than 11% on Monday afternoon. The fintech company‘s financial results were mixed, showing gains but failing to hit the higher expectations that many of its shareholders had.

Global Payments saw its growth slow considerably during the first quarter of 2022. Adjusted revenue was up just 8% to $1.95 billion. Earnings of $2.07 per share on an adjusted basis were up 14% year over year.

The company noted that it was pleased to do as well as it did given a tough environment that includes lingering impacts of the COVID-19 pandemic, headwinds from the war in Ukraine, and adverse moves in foreign currencies compared to the U.S. dollar. Moreover, Global Payments has worked to consider its strategic options for its Netspend consumer business, which many believe could unlock some value for shareholders.

Unfortunately, Global Payments doesn’t expect things to pick up considerably in the near future. The company repeated its expectation for full-year 2022 revenue of $8.42 billion to $8.5 billion, which would be up just 9% to 10% from 2021 levels. Similarly, adjusted earnings of $9.45 to $9.67 per share for the year would be up 16% to 19% year over year. That suggests that further problems could exist not just for Global Payments but for the entire financial industry as it deals with similar worldwide issues.

Moody’s moves lower

Shares of Moody’s were also down, falling 7% in Monday afternoon trading. The financial information and bond rating company wasn’t able to deliver the goods in its first-quarter report.

Moody’s found its year-over-year comparisons too difficult to keep positive. Revenue of $1.52 billion was down 5% from record levels in the year-earlier quarter. Net income plunged by roughly a third to $498 million, and adjusted earnings of $2.89 per share fell 29% from where they were in the first quarter of 2021.

Beneath the surface, Moody’s business segments saw very different results. The biggest hit came from the corporate finance segment where revenue was down well over 30% year over year. That came from a massive drop in rated security issuance activity. However, Moody’s analytics business did quite well, with its decision-solutions segment seeing sales jump nearly by half from year-ago levels.

Most investors see Moody’s as holding up well regardless of market conditions. However, with rising interest rates, many fear that the huge levels of bond issuance on which Moody’s has given ratings could dry up quickly, and that could make 2022 a year to forget for the company.