The New York Stock Exchange closed lower on Friday, hurt by some disappointing corporate results and poor metrics, two reminders that the economy is decelerating.
The Dow lost 0.43% to 31,899.29, the Nasdaq lost 1.87% to 11,834.11 and the broader S&P 500 lost 0.93% to 3,961.63.
“The market is digesting the company’s performance this week,” explained Edward Jones’ Angelo Kourkafas.
He added that during the week, “our Netflix and Tesla were not as bad as expected, but we were disappointed on the technology side.”
Snap (-39.08% to $9.96), the parent company of social network Snapchat, just walked off the road, nearly tripling its losses and making bearish comments on advertising.
Companies with little ghosts took other social networks from Meta (-7.59%) to Pinterest (-13.51%) through future listing tools on Donald Trump’s Truth Social platform (-3.04%).
In addition, companies that also rely on advertising, such as Alphabet (-5.81%) or digital marketing platform The Trade Desk (-7.30%), were also affected.
Although it also missed analysts’ forecasts, Twitter survived (+0.81% to $39.84). The market tends to retain growth in the number of active users, which is considered encouraging given the background and controversy with Elon Musk.
Angelo Kourkafas said so far, “even if the results are not shocking, they are good enough” to support the indices.
For Nick Reece of Merk Investments, Snap’s results were “a reminder” of the struggles the tech industry faces between rising credit costs, ongoing supply issues and a slowing economy.
As a result, “concerns about next week’s tech performance” from the likes of Amazon, Apple, Microsoft and Meta “put pressure on the market.”
Among a handful of other failures, steelmaker Cleveland-Cliffs (-8.87%) posted a lower-than-expected profit and phone operator Verizon (-6.74%) lowered its target.
Against the backdrop of unfavorable tech and growth stocks, so-called defensive stocks that are less sensitive to the economic situation are favored by investors, be it McDonald’s (+0.21%), Johnson & Johnson (+0.47%) or Procter & Gamble (+1.60%).
Nick Reece said the market was also “weighted by macroeconomic indicators,” primarily a range of PMI activity indices, particularly the U.S. composite index. The latter hit its lowest level since June 2020.
“Recession talk is back,” the analyst explained.
As a result, operators see the U.S. central bank (Fed) pausing its rate hike cycle in December after raising rates by 0.75 percentage point in July, then raising rates twice in September and November by half a percentage point each .
“We are seeing more and more signals that the inflation peak has passed,” Angelo Kourkafas said.
That sentiment explained the sharp contraction in bond yields on Friday, with investors arguing that the Federal Reserve was less aggressive than expected in tightening monetary policy.
The 10-year government bond yield fell to 2.75%, its lowest level in nearly two months, from 2.87% the previous day.
In addition to the results and the outcome of the Federal Reserve meeting, Wall Street next week will follow up with its first estimates of U.S. gross domestic product (GDP), which could show a contraction in the second quarter.
After the initial decline in the first quarter, the decline would technically plunge the U.S. into a recession.
Despite better-than-expected results, toy maker Mattel’s rating fell (-7.12% to $22.45). The doll business is in decline, especially Barbie.
American Express gained traction (up 1.88% to $153.01) after reporting better-than-expected results, helped by a recovery in tourism and business travel. The credit card specialist also raised its full-year growth target.