4:09pm: Big Tech takes a bath
After spending the vast majority of the day underwater, the Dow Jones Industrial Average added 51 points, 0.2%, to close at 31,931. The Nasdaq, meanwhile, tumbled 271 points, 2.4%, to 11,246, and the S&P 500 32 points, 0.8%, to 3,942.
The tech swoon was driven by Snap Inc (NYSE:SNAP), the parent company of social media platform Snapchat, which cut its forecast after the bell Monday amid rising inflation and interest rates, and supply chain and labor challenges.
The ripples were widespread in the sector. Facebook parent Meta Platforms Inc (NASDAQ:FB) lost more than 7% to $181.28, Amazon Inc stock dropped more than 3% to $2,082 and Twitter Inc (NYSE:TWTR) shares declined more than 5% to $35.88.
12:05pm: US stocks continue into the red at noon
US stocks slipped further into the red at noon as tech companies come under renewed pressure following Snapchat’s parent company Snap warning investors it would not meet its prior revenue and profit forecasts.
Just after midday, the tech-laded Nasdaq had plunged 333 points or 2.9% at 11,203 points.
The Dow had shed 296 points or 0.9% at 31,584 points while the S&P 500 had slipped 70 points or 1.8% at 3,904 points.
At noon, Snap was down about 40%, trading at about $13 a share.
In terms of other major movers in the tech sector, Facebook’s parent company Meta Platforms Inc (NASDAQ:FB), Google’s parent company Alphabet Inc (NASDAQ:GOOG), and Twitter Inc (NYSE:TWTR) had dropped about 9%, 6% and 4% respectively.
IG chief market analyst Chris Beauchamp said it should be clear by now, even to the most enthusiastic dip buyer, that markets were not going to bounce anytime soon.
“Last week’s rally at least extended into the middle of the week, but this bounce barely made it to the end of Monday’s session,” Beauchamp said.
“Snap seems to have taken the blame for the market’s inability to hold its limited gains, but in reality, investors are still taking every chance they can to cut back on stocks, particularly those previous market darlings in the tech sector.”
Meanwhile, the US housing market appears to be cooling. Housing transactions dropped off dramatically from 709,000 in March to 591,000 in April, more than 150,000 below the consensus analyst expectation of 749,000.
ING chief international economist James Knightley said the recession risk was rising as housing sales plunged due to rising mortgage rates and a general lack of affordability.
“Inventory for sale is rising rapidly, which suggests we are moving from an environment of excess demand, seen since the start of the pandemic, to one of excess supply – this is bad news for home prices and economic activity,” Knightley said.
“Rising interest rates in an environment of falling home prices are never a good combination for consumer sentiment and will add to the chances of a retrenchment and potential recession down the line.”
10.30am: Proactive North America headlines:
Activision Blizzard workers vote to unionise
Canada Silver Cobalt Works announces plans to carry out an airborne VTEM Plus geophysical survey at its Quebec property
Kontrol Technologies wins multi-year emissions monitoring contract for rail infrastructure expansion in Ontario
Recruiter.com unveils new candidate tracking capabilites in a suite of AI updates
Gratomic discovers possibly the largest graphite vein ever recorded at its Aukam project in Namibia
EverGen Infrastructure acquires Ontario natural gas foothold with 50% stake in Northeast Renewable's Project Radius
Deepspatial joins World Geospatial Industry Council and showcases its technology at council AGM
ACME Lithium gets set to drill Phase 1 program at Clayton Valley project to assess lithium brine potential
World Copper announces exercise of Zonia copper project royalty option and subsequent buy-out
FPX Nickel reveals 2022 drill plans for its Decar Nickel District project in British Columbia
Nova Royalty set to acquire portion of existing royalty on Lundin Mining's Josemaria copper-gold-silver project in Argentina
Ultra Lithium closes final tranche of non-brokered private placement raising gross proceeds of C$4,429,800
PyroGenesis Canada announces joint project with leading furnace maker to test its plasma torches in remelting of aluminum scrap
Orgenesis (NASDAQ:ORGS) enters second phase of POCare Platform rollout; sees recurring revenues from long-term contracts for the next 2-3 years
Guardforce AI (NASDAQ:GFAI) announces definitive agreements to acquire eight companies in China
ReVolve Renewable Power completes right-of-way approval process in ‘major milestone’ for Bouse solar and storage project
GR Silver Mining (TSX-V:GRSL) announces high-grade silver results from underground infill drilling at Plomosas Project in Mexico
Irwin Naturals expands licensing footprint for branded THC products to Ohio
Benchmark Metals expands new area at Marmot Zone with high grade discovery
i-80 Gold says drilling expands high-grade mineralization in South Pacific Zone at Granite Creek
9:35am: US stocks a sea of red
After Monday’s rally, US stocks opened lower on Tuesday led by renewed pressure on tech companies.
Just after the open, the tech-heavy Nasdaq was down 221 points or 1.9% at 11,314 points.
The Dow had shed 152 points or 0.5% at 31,728 points and the S&P 500 was down 42 points or 1% at 3,932 points.
The downward spiral has been spurred by Snap Inc (NYSE:SNAP), the parent company of social media platform Snapchat, slashing its forecast amid rising inflation and interest rates, and supply chain and labor challenges.
After last week’s disappointing retail earnings, Snap’s profit warning has reiterated the impact of inflationary pressures on corporate bottom lines, sparking concern among investors.
According to Bloomberg, following Snap’s warning social media stocks are on course to shed more than $100 billion, with other social media companies including Facebook’s parent company Meta Platforms Inc (NASDAQ:FB), Google’s parent company Alphabet Inc (NASDAQ:GOOG), Twitter Inc (NYSE:TWTR), and Pinterest Inc (NYSE:PINS) dropping in pre-market trading.
After dropping about 30% in pre-market trading, Snap was down about 36% just after the open.
Meta, Alphabet, Twitter, and Pinterest had dropped 7%, 6%, 2%, and 17% respectively.
OANDA senior market analyst Craig Erlam said pessimistic Chinese growth forecasts and a profit and revenue warning from Snap appear to have been behind the latest market tumble.
“Although there are so many headlines pouring out, you could probably pick another half a dozen reasons to explain the selling,” Erlam said.
“Ultimately it comes down to the fact that the level of economic uncertainty is immense and while recessions are not the base case, they are a very realistic prospect.”
He added that wild swings from one day to the next have become the norm as investors tried to pick the bottom in the markets only to be dealt another blow from one negative headline or another.
“And they continue to come thick and fast, leaving equity markets vulnerable to further drops,” Erlam said.
6.30am: Retreat after recovery
US stocks were expected to open lower on Tuesday, resuming falls amid renewed concerns about the impact of a slowing economy on corporate bottom lines, killing off the rally seen yesterday.
The reversal is seen after Snap, the parent company of social media platform Snapchat, slumped nearly 30% after hours on Monday after the firm warned about the macroeconomic headwinds it faces, putting the focus on the uncertain outlook for corporate earnings, especially in the technology sector.
Futures for the Dow Jones Industrial Average were down 0.7% in pre-market trading, while those for the broader S&P 500 index fell 1.1%, and contracts for the tech-heavy Nasdaq-100 shed 1.7%.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, predicted that Monday’s gains will likely remain short-lived, citing the 30% plunge in Snap shares plunged in after-hours trading after the company warned that it will miss revenue and earnings.
“And the bad news from Snap pulled Meta 7% lower in the after hours. As a result, the US futures point at a negative start. It’s like we are coming back to reality after a sunny day in the markets,” she added.
Purchasing Managers Indexes (PMIs) for the US manufacturing and services sectors. due at 9.45am ET, will also be in focus. Flash headline PMI readings are expected to show continued growth although at a slightly easier pace.
Investors will also pay attention to a speech from US Federal Reserve chairman Jerome Powell scheduled for 12.20pm ET.
Stock markets in Shanghai, Tokyo and Hong Kong were lower today, with tech stocks leading the falls, adding to the gloom.
On the geopolitical front, news that the US may reverse some of the tariffs it has imposed on China was seen as a move that could dampen inflation and be largely positive for equities. But the favorable impact was partly offset by news that the US military will defend Taiwan if the island nation is invaded by China.
“This represents significant volatility for the global markets as the US has not used its military in the ongoing war in Ukraine, but it has provided weapons and financial aid,” said Naeem Aslam, chief market analyst at avatrade.com. Against this backdrop, he said, the S&P 500 may well head towards bear market territory.
Elsewhere, oil prices were slightly lower. WTI crude oil futures were down 0.5% at $109.73 a barrel and Brent crude futures shed 0.5% at $112.86
Contact the author at jon.hopkins@proactiveinvestors.com