[New York Stock Market] "Rose-colored glasses removed" Sharp drop due to Snap's shock... Nasdaq down 1.87%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed lower across the board on the last trading day of the week, the 22nd (local time), as investor sentiment was dampened by the earnings shock from Snap. Snap, which relies heavily on digital advertising revenue and was the first among such companies to release earnings, posted an earnings shock, intensifying concerns surrounding other big tech companies.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,899.29, down 137.61 points (0.43%) from the previous session. The S&P 500, focused on large-cap stocks, ended at 3,961.63, down 37.32 points (0.93%), and the tech-heavy Nasdaq closed at 11,834.11, down 225.50 points (1.87%).

However, due to the rally earlier this week, the Nasdaq rose 3.3% for the week. The Dow and S&P 500 also ended the week up in the 2% range. During the session, the S&P 500 briefly touched the 4,000 mark.

Investors closely monitored earnings forecasts of other tech companies and economic indicators amid growing concerns following Snap’s earnings announcement.

Snap, the social media company that reported an earnings shock after the previous day’s market close, plunged 39.14% compared to the previous session. Alphabet, Google’s parent company, and Meta Platforms, Facebook’s parent company, slid 5.63% and 7.59%, respectively. As Snap, which heavily depends on digital advertising revenue, disclosed disappointing results, concerns shifted to other tech companies with similar revenue structures. Pinterest’s stock also dropped 13.51%.

Twitter recorded a quarterly loss and showed a decline before the market opened but closed the regular session up 0.81%. The company cited uncertainties including Elon Musk, Tesla CEO’s acquisition cancellation announcement, as one of the reasons behind the weak performance beyond advertising. American Express rose 1.88% after reporting better-than-expected earnings. Verizon, despite beating expectations, lowered its future outlook and slid more than 6%.

Next week, Microsoft (MS), Meta Platforms, Apple, and Amazon are scheduled to release earnings. So far, 21% of S&P 500 companies have reported earnings. According to FactSet, 70% of those have exceeded market expectations. Sam Stovall, Chief Investment Strategist at CFRA Research, noted, "Snap’s disappointing performance dampened the Nasdaq’s upward momentum and had a cascading effect on the S&P 500 today."

U.S. economic indicators were weak. According to S&P Global, the preliminary July Manufacturing Purchasing Managers’ Index (PMI) for the U.S. was 52.3, marking the lowest level in 24 months. The preliminary July Services PMI fell below the baseline at 47, indicating contraction. The composite PMI, combining services and manufacturing, dropped from 52.3 in the previous month to 47.5, the lowest in over two years. Notably, these indicators were released the day after weekly jobless claims exceeded market expectations, raising questions about the labor market’s health.

In the New York bond market, the yield on the U.S. 10-year Treasury note fell to around 2.75%. The decline in Treasury yields indicates increased demand for the safe-haven asset, pushing prices up. The 30-year yield also dropped to about 2.97%. The 2-year yield, sensitive to monetary policy, fell below the 3% mark but remained above long-term yields at 2.98%. This inversion of short- and long-term yields is typically interpreted as a recession warning sign.

Despite this week’s rally, warnings persist that the bear market is not over. Soaring inflation, recession concerns, the ongoing Ukraine war, and the upcoming Federal Reserve (Fed) interest rate decision next week are cited as factors that could bring greater market volatility. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently prices in over a 78% chance of a 0.75 percentage point rate hike in July.

Christina Hooper, Senior Global Market Strategist at Invesco, said, "Earnings reports earlier this week were not great, but not terrible either," adding that by Friday, "the rose-colored glasses came off." The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s ‘fear gauge,’ moved slightly lower around the 23 level.

International oil prices fell due to weak economic data from major countries. On the New York Mercantile Exchange, September West Texas Intermediate (WTI) crude oil closed at $94.70 per barrel, down $1.65 (1.71%) from the previous session, marking a third consecutive day of decline. The safe-haven gold price rose. On the New York Commodity Exchange, August gold futures closed at $1,727.40 per ounce, up $14 (0.8%).

This content was produced with the assistance of AI translation services.