Wall Street closes lower as ad tech and social media stocks fall

  • Snap Inc shares plunge on slowing growth
  • Communications services stocks lead sector declines
  • AmEx raises revenue forecast on resilient card spending
  • Indices down: Dow 0.43%, S&P 500 0.93%, Nasdaq 1.87%

July 22 (Reuters) – U.S. stocks ended lower on Friday as Snap’s disappointing earnings spooked investors and shares of social media and ad tech firms fell, reversing the card issuer’s gains American Express after an optimistic forecast.

Still, all three major indexes posted weekly gains despite Friday’s losses, with the tech-heavy Nasdaq ending the week up 3.3%. The S&P 500 rose 2.4% and the Dow gained 2%.

The Snapchat owner posted its weakest quarterly sales growth as a public company, sending shares of Snap Inc down nearly 40%, while Twitter Inc (TWTR.N) reversed earlier losses to add 0, 8% following a surprise drop in revenues. Read more

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Other online companies that rely heavily on ads, such as tech giants Meta Platforms Inc (META.O) and Alphabet Inc (GOOGL.O) fell 7.6% and 5.6%, respectively, weighing on the Nasdaq (.IXIC).

Meta and Alphabet are expected to report earnings next week, along with mega-cap peers including Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O).

The S&P 500’s communication services (.SPLRCL) and information technology (.SPLRCT) fell 4.3% and 1.4%, respectively, leading declines among all 11 sectors in the index.

The Dow Jones Industrial Average (.DJI) fell 137.61 points, or 0.43%, to 31,899.29, the S&P 500 (.SPX) fell 37.32 points, or 0.93%, to 3,961.63 and the Nasdaq Composite (.IXIC) fell 225.50 points, or 1.87%, to 11,834.11.

“Earnings are less bad than expected, but they are deteriorating compared to what we have become accustomed to and accustomed to over the past few quarters,” said Bob Doll, CIO at Crossmark Global Investments.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 21, 2022. REUTERS/Brendan McDermid

With 106 of the S&P 500 companies reporting earnings through Friday morning, 75.5% beat analysts’ expectations, below the 81% beat rate over the past four quarters, according to Refinitiv data. Read more

All eyes are on the Federal Reserve meeting and second quarter US gross domestic product data next week. While the US central bank is expected to raise interest rates by 75 basis points to curb runaway inflation, GDP data is expected to turn negative again. Read more

Meanwhile, a Friday survey showed U.S. business activity contracted for the first time in nearly two years in July, heightening concerns about an economy dragged down by high inflation, rising interest rates interest and declining consumer confidence. Read more

“The economic data is weaker…which kind of confirms the fact that a recession is very likely over the next 12 months. And the markets are trying to figure out what that looks like with a significant slowdown in economic growth. [and] the Fed in the midst of quite aggressive fiscal tightening,” said Megan Horneman, chief investment officer at Verdence Capital Advisors in Hunt Valley, Maryland.

Verizon Communications Inc (VZ.N) fell 6.8% after it said it cut its adjusted annual profit forecast as inflation weighs. American Express Co (AXP.N) rose 1.9% on strong earnings and an increase in revenue expectations. Read more

Volume on U.S. exchanges was 10.38 billion shares, compared to an average of 11.53 billion for the full session over the past 20 trading days.

Falling issues outnumbered rising ones on the NYSE by a ratio of 1.43 to 1; on the Nasdaq, a ratio of 2.49 to 1 favored the decliners.

The S&P 500 posted 1 new 52-week high and 31 new lows; the Nasdaq Composite recorded 32 new highs and 74 new lows.

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Reporting by Echo Wang in New York; Additional reporting by Shreyashi Sanyal, Aniruddha Ghosh and Bansari Mayur Kamdar in Bengaluru; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila, Shounak Dasgupta and Aurora Ellis

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