On Friday, US stocks ended the day lower, as investors got spooked because of Snap Inc.’s poor earnings. This resulted in a drop in stocks of social media and ad tech companies, thereby offsetting the gains that were seen in American Express, as the card issuer delivered an upbeat forecast.
Index and stock gains
Despite the losses on Friday, all three of the US stock indexes were still able to post gains for the week, with the tech-focused Nasdaq Composite ending the week higher by 3.33%. There was a 2.4% gain in the S&P 500 and a 2% gain in the Dow.
The owner of Snapchat posted its weakest-ever growth in quarterly sales after its public listing, which saw Snap Inc.’s shares plunge by almost 40%. Meanwhile, Twitter Inc. managed to reverse some of the losses made earlier in the session, as it rose by 0.8% after a surprise decline in revenue.
The Nasdaq was weighed down by other online firms that are heavily dependent on ads, such as Alphabet Inc. and Meta Platforms Inc., which recorded declines of 5.6% and 7.6%, respectively. Both the companies are expected to post their own quarterly earnings in the coming week, along with some other Big Tech peers, like Microsoft Corp., Apple Inc. and Amazon.com Inc.
Amongst the decliners in the S&P 500, the information and communication services sectors were in the lead, as they fell by 1.4% and 4.3%, respectively. The Dow Jones Industrial Average recorded a decline of 0.43%, which saw it lose 137.61 points to end the day at 31,899.29. A 0.93% drop in the S&P 500 saw it lose 37.32 points and end the day at 3,961.63. A 1.87% drop in the Nasdaq Composite resulted in a loss of 225.50 points, which brought it down to 11,834.11.
Earnings season
By Friday morning, about 106 companies have already reported their earnings and stats show that as compared to the 81% beat rate seen in the previous four quarterly reports, about 75.5% have posted profits better than expectations.
Market analysts said that while the earnings were certainly less bad than had been expected, there is no denying that they are deteriorating from what the markets have become used to seeing in the last few quarters.
Fed meeting and data
The US Federal Reserve is scheduled to meet on July 26th and a rate hike of 75 basis points is expected in order to control surging inflation. The GDP data for the second quarter is also scheduled for release this week and it is expected to be negative too.
Economic data on Friday showed that business activity in the US had slowed down for the first time in over two years, which raises concerns about the performance of the economy that is being battered by high inflation, rising rates, and falling consumer confidence. Analysts said that with weakening data, the chances of an economic recession are also rising in the next 12 months or so.
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