Front of the New York Stock Exchange (GETTY IMAGES NORTH AMERICA/SPENCER PLATT)
The New York Stock Exchange opened lower on Tuesday, baffled by poor corporate results driven by inflation and rising rates that portend an economic slowdown.
Around 1415 GMT, the Dow Jones lost 0.70%, the technology-heavy Nasdaq fell 3.22% and the broader S&P 500 shed 1.71%.
“The good feelings that allowed Monday’s recovery were overshadowed by a warning from Snap,” Briefing.com’s Patrick O’Hara explained in a note.
Social media parent company Snapchat said Monday after the stock market that its turnover and second-quarter results are likely to be below the lower end of the range originally announced.
In early trading, the platform fell 40.12% to $13.45.
In the wake of the Santa Monica, California group, the entire sector of social networks and sites dependent on advertising was swept away, from Meta (-9.33%) to Alphabet (-7.39%), through Pinterest (-25.34% ) and Twitter (-3.35%).
“This is a warning sign that companies themselves will cut their advertising budgets because they think they will make less money in the near future,” responded Gregory Volokhin of Meeschaert Financial Services.
As for the distribution sector, new data has confirmed that it is suffering from skyrocketing prices, which is hurting its profits but also starting to discourage consumption.
Ready-to-wear brand Abercrombie & Fitch (-26.90% to $19.54), for example, was in despair after posting a quarterly loss, while analysts were expecting a small gain. The Group also lowered its margin targets to take into account rising shipping and transportation costs.
“It is very difficult not to see that the economic cycle is worsening rather than improving,” Grigory Volokhin insisted.
Electronics store chain Best Buy (+3.13% to $74.86) also reported lower revenue and earnings than the same period last year.
The retailer has lowered its targets for fiscal year 2023, which will end at the end of next January.
Ralph Lauren was carried away by this current seller (-2.36% to $88.80) despite better-than-expected results, thanks in part to growth in Europe and online sales dynamism in North America and Asia.
“Nothing escapes the fact that the headwind brought by inflation affects absolutely all industries,” Grigory Volokhin said. “Raising rates is only good for one sector, unfortunately, these are banks. The rest of the economy is suffering.”
On Monday, JPMorgan Chase (+0.58% to $125.32) said it was more optimistic about 2022 and 2023 results.
In this pessimistic climate, defensive actions were called for; stocks traditionally less sensitive to economic cycles. Coca-Cola (+0.83%), Johnson & Johnson (+0.77%), Merck (0.55%) or Procter & Gamble (+0.68%) advanced.
Among the few companies that performed well was Zoom (+0.91% to $90.14), which, while reporting slower growth, raised its profit target.
The mood was further dampened by a 16.6% drop in US new home sales in April, which caught analysts who had expected a slight 1.7% decline by surprise.
After several months of mimicking stock movements, an unusual phenomenon, the bond market was once again playing its contrapuntal role and was favored by investors.
The yield on 10-year US government bonds fell to 2.75% from 2.85%, while the prices of bonds that move in the opposite direction of their rates rose.