4:16pm: Snap shares swoon on earnings miss
The Dow closed Friday down 138 points, 0.4%, at 31,899, the Nasdaq Composite slipped 226 points, 1.9%, to 11,834 and the S&P 500 lost 37 points, 0.9%, to 3,962.
Despite the day's losses, the three benchmarks all finished higher on the week.
Tech shares struggled, led by Snap Inc (NYSE:SNAP), shares of which tumbled nearly 40% to $9.95 after the company reported an earnings miss.
“Snap has managed to snap the uptrend in the Nasdaq by reporting disappointing earnings, which has created a cascading effect on the S&P,” said Sam Stovall, chief investment strategist at CFRA Research, as reported by CNBC.
“This is just an example of the volatility that investors should expect as earnings are reported, and, therefore, could cause fluctuations in prices in response to better than or worse than results,” he added.
12:05 pm: Twitter disappointment sends stocks lower
Travel and healthcare stocks saw a bump in stock prices today, but communications giant Twitter dropped – influencing the major indices to go from green territory into red.
At midday, the Dow Jones was down 0.13% to 31,980 points, the S&P 500 was down 0.69% to 3,971 and the Nasdaq Composite was down 1.52% at 11,878.
Twitter was down 2% in morning trading due to disappointing earnings results, but rose slightly by midday to stand at -1% or US$ 39 a share. Twitter posted a loss of eight cents for 2Q, compared to expected earnings of 14 cents, and its revenue fell 1% year-over-year to $1.18 billion, short of analyst expectations of $1.32 billion.
However, American Express beat estimates for 2Q results, thanks to people returning to travel and entertainment purchases. At midday, American Express stock was trading at $153 , up 2%.
Tenet Healthcare (NYSE:THC) saw adjusted earnings per share of $1.50, beating estimates of $0.82, with a corresponding bump in stock price by over 10%. HCA Healthcare stock moved 11% higher after reporting positive 2Q results.
Can earnings season keep up the good news?
According to Chris Beauchamp, an analyst at IG, it hasn’t been a bad start to second quarter earnings season, and they’re looking forward to next week, with Amazon and Apple at the top of the bill.
“Stocks have gone from pricing in full-blown doom to being much more optimistic, but sentiment remains fragile at best, and it wouldn’t take much to spark yet another leg down that rapidly unwinds the gains seen so far in July,” Beauchamp wrote in a note.
10.50am: Proactive North America headlines:
Snap bears the brunt as digital advertising suffers in downturn
Good Shroom Co to launch instant beverage products at all Fresh Thyme Markets in the US
Todos Medical and 3CL Pharma hail return to better health in long COVID case through use of Tollovid
Base metal price weakness should be short-lived; likely to see demand bounce amid green energy transition, reckons Stifel GMP
Twitter reports disappointing earnings, blames Elon Musk for uncertainty over legal battle
FDCTech (OTCQB:FDCT) to acquire 80% equity interest in US investment bank CIM Securities
American Resources kicks off production at Carnegie 2 metallurgical carbon mine in Pike County, Kentucky
Royal Helium closes deal to acquire Imperial Helium
Versus Systems signs first television contract for new sports team-focused TV channel
ioneer seals deal for lithium offtake with Ford, targeting end-to-end US EV supply chain
Plurilock Security commences private placement of convertible debenture units for total gross proceeds of up to C$2.5M, updates on acquisition pipeline
CULT Food Science Corp (CSE:CULT, OTCQB:CULTF) signs letter of intent to acquire 100% of Food Revolution Media
Gevo announces largest sustainable fuel sales agreement with American Airlines
9.35am: Choppy trading rounds out the week
US stocks opened mixed on Friday as investors digested a flurry of corporate earnings surprises.
Just after the open, the Dow Jones Industrial Average had added 163 points at 32,200 points and the S&P 500 was up 6 points at 4,005 points, while the Nasdaq Composite had shed 35 points at 12,025 points.
After plunging in pre-market trading off the back of a 2Q earnings miss released after the bell yesterday, Snap Inc (NYSE:SNAP) was trading down 34% at $10.80 per share.
OANDA senior market analyst Craig Erlam said a choppy end to the week pretty much summed up how the rest of it had been as investors had to make sense of a wide range of data, earnings, rate decisions, and geopolitical developments.
“And all at a time when there is immense uncertainty around the economic outlook as a result of inflation, Covid and the war in Ukraine,” he said.
He added that earnings season had brought numerous cases of earnings surprises driven by the “it’s not as bad as we feared” argument.
“That's a relief of course, but surely not a case for a sustainable rebound,” Erlam said. “We'll soon see whether that turns out to be the case but I'm not getting carried away yet.”
6.30am: Caution to prevail
US stocks were expected to open slightly lower on Friday with tech stocks coming under pressure in the wake of Snap’s disappointing results, released after trading hours yesterday, while the broader market is seen treading water following a mostly favorable earnings season so far.
Futures for the Dow Jones Industrial Average were trading flat pre-market, while those for the broader S&P 500 index were down 0.3%, and futures for the tech-laden Nasdaq-100 were down 0.5%.
“Looking at the US futures, especially the Nasdaq, tech investors are still disappointed with Snap’s results which sent the social media stock plunging yesterday, said Naeem Aslam, chief currency analyst at avatrade.com.
Snap shares slumped 25% in aftermarket trading after the social media company and parent of Snapchat reported dismal quarterly earnings figures, with losses nearly tripling to $422 million due to a challenging business environment and faltering advertising revenue.
Snap shares are likely to be punished again today, warned Aslam.
The broader market, however, is expected to fare slightly better as bargain hunters return to the market.
“This week has been mainly about US corporate earnings and their results have driven the price action. There is no doubt that we have seen a large number of companies beating Wall Street expectations and this has supported the sentiment among investors and traders,” Aslam said.
On the earnings front, the focus on Friday will be on quarterly results from American Express, Verizon and Twitter.
Investors are also looking ahead to the US Fed’s rate verdict due out on Wednesday next week. US rate-setters are fighting to rein in inflation which is currently running at a high not seen in over 40 years. Markets are largely pricing in a 75-basis point hike but there are residual expectations that the Fed may move aggressively with a 100-basis point increase.
“Today, traders are likely to maintain a somewhat cautious approach as today is the last trading day of the week and next week, we have the FOMC (Federal Open Market Committee) decision coming out,” added Aslam.
In energy markets, WTI crude oil futures were 0.5 % lower at $95.84 a barrel, while Brent crude futures were down 0.2 % at $103.63.
Contact the author at jon.hopkins@proactiveinvestors.com