The S&P 500 fell nearly 1% on Friday, but finished the week higher, as investors digested disappointing results from Snap that sent social media shares reeling.
The Dow Jones Industrial Average lost 137.61 points, or 0.43%, to 31,899.29. The S&P 500 declined 0.93% to three,961.63, while the Nasdaq Composite traded 1.87% lower to 11,834.11.
Those losses cut into weekly gains for all three major averages, with the Dow closing out the week nearly 2% higher. The S&P 500 advanced about 2.6%, and the Nasdaq capped the week up 3.3%.
An earnings miss from Snap, which sent shares tumbling about 39.1%, halted this week’s Nasdaq rally. Traders, eyeing some better-than-expected results from tech corporations, had deliberated whether markets had finally found a bottom.
“Snap has managed to snap the uptrend within the Nasdaq by reporting disappointing earnings, which has created a cascading effect on the S&P,” said Sam Stovall, chief investment strategist at CFRA Research.
“That is just an example of the volatility that investors should expect as earnings are reported, and, due to this fact, could cause fluctuations in prices in response to raised than or worse than results,” Stovall added.
The outcomes from the Snapchat parent were followed by a slew of analyst downgrades on the stock. Snap’s quarterly report also weighed on other social media and tech stocks, which investors feared could face slowing internet advertising sales.
Shares of Meta Platforms and Pinterest fell about 7.6% and 13.5%, respectively, while Alphabet lost 5.6%.
Twitter rose 0.8% despite reporting disappointing second-quarter results that missed on earnings, revenue and user growth. The social media company blamed challenges within the ad industry, in addition to “uncertainty” around Elon Musk’s acquisition of the corporate, for the miss.
Verizon was the worst-performing member of the Dow after reporting earnings. The wireless network operator dropped 6.7% after cutting its full-year forecast, as higher prices dented phone subscriber growth.
About 21% of S&P 500 corporations have reported earnings up to now. Of those, nearly 70% have beaten analyst expectations, in accordance with FactSet.
Economic data weighs on sentiment
Meanwhile, concerns over the state of the U.S. economy also weighed on sentiment after the discharge of more downbeat economic data. A preliminary reading on the U.S. PMI Composite output index — which tracks activity across the services and manufacturing sectors — fell to 47.5, indicating contracting economic output. That is also the index’s lowest level in greater than two years.
The report comes a day after the U.S. government reported an unexpected uptick in weekly jobless claims, raising questions on the health of the labor market.
Still, Wall Street has enjoyed a powerful week for markets, as traders absorbed second-quarter results which have are available higher than feared. On Friday, the S&P 500 touched the 4,000 level, which it hasn’t hit since June 9, before coming back down.
The Dow got a lift earlier within the session following a strong earnings report from American Express. The bank card company jumped about 1.9% after beating analyst expectations, due to record consumer spending in areas corresponding to travel and entertainment.
“That is showing you that market expectations are really low, that a bit of bit of excellent news can go a good distance when you’ve got low expectations,” said Truist’s Keith Lerner, noting that investors rotated back into growth stocks even amid weak economic data.
To make certain, some market participants don’t imagine the bear market is over despite this week’s gains. Since World War II, nearly two-thirds of one-day rallies of two.76% or more within the S&P 500 occurred during bear markets, with 71% occurring before the underside was in, in accordance with a note this week from CFRA’s Stovall.
Stovall believes the broader market index could rally as high because the 4,200 level before coming back all the way down to challenge June lows.
— CNBC’s Fred Imbert contributed to this report.
Lea la cobertura del mercado de hoy en español aquí.