Wall Street declines as ad tech and social media stocks weigh

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 21, 2022. REUTERS/Brendan McDermid

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  • Twitter drops as quarterly revenue drops
  • Snap Inc shares plunge on slowing growth
  • Communications services stocks lead sector declines
  • AmEx raises revenue forecast on resilient card spending
  • Indices down: Dow 0.83%, S&P 500 1.39%, Nasdaq 2.29%

July 22 (Reuters) – Major U.S. indexes tumbled on Friday as shares of social media and ad tech companies tumble following weak earnings at Twitter and Snap, reversing the card issuer’s gains American Express following optimistic forecasts.

Still, the S&P 500 (.SPX) and Dow (.DJI) are on track to end the week with their biggest gains in nearly a month, with growth stocks doing the heavy lifting as markets applaud quarterly reports from Tesla Inc and Netflix Inc (NFLX.O).

Shares of Snap Inc fell nearly 40% after the Snapchat owner posted its weakest quarterly sales growth as a public company, while Twitter Inc (TWTR.N) fell 0.6 % following a surprise drop in revenue. Read more

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Online advertising giants Meta Platforms Inc (META.O) and Alphabet Inc (GOOGL.O) fell 7.5% and 6.4% respectively, weighing on the Nasdaq (.IXIC).

Meta and Alphabet are expected to report earnings next week, along with mega-cap peers including Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O).

The S&P 500’s communications services (.SPLRCL) and information technology (.SPLRCT) fell 4.8% and 1.9%, respectively, leading declines among all 11 sectors in the index.

“Earnings are less bad than expected, but they are deteriorating compared to what we have become accustomed to and accustomed to over the past few quarters,” said Bob Doll, CIO at Crossmark Global Investments.

“The other cross-current with earnings is how far will the Fed have to go to fight this inflation? Have we seen a spike in inflation? All of these cross-currents will continue to create volatility.”

Market participants continue to eagerly await the Federal Reserve meeting and second quarter US gross domestic product data next week. While the US central bank is expected to raise interest rates by 75 basis points to curb runaway inflation, GDP data is expected to turn negative again. Read more

Meanwhile, a Friday survey showed U.S. business activity contracted for the first time in nearly two years in July, heightening concerns about an economy dragged down by high inflation, rising interest rates interest and declining consumer confidence. Read more

Verizon Communications Inc (VZ.N) cut its adjusted annual earnings forecast as inflation weighs, sending its shares tumbling 8%. American Express Co (AXP.N) rose 2% on strong earnings and an increase in revenue expectations. Read more

As of 2:07 p.m. ET, the Dow Jones Industrial Average (.DJI) fell 264.87 points, or 0.83%, to 31,772.03, the S&P 500 (.SPX) was down 55.4 points, or 1.39%, to 3,943.55 and the Nasdaq Composite (.IXIC) fell 276.24 points, or 2.29%, to 11,783.37.

Analysts now expect S&P 500 earnings to rise 6.2% year-on-year in the second quarter, down from the estimate of 6.8% at the start of the three-month period, according to Refinitiv data.

Falling issues outnumbered rising ones on the NYSE by a ratio of 1.83 to 1; on the Nasdaq, a ratio of 2.86 to 1 favored the decliners.

The S&P 500 posted 1 new 52-week high and 31 new lows; the Nasdaq Composite recorded 25 new highs and 58 new lows.

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Reporting by Echo Wang in New York; Additional reporting by Shreyashi Sanyal, Aniruddha Ghosh and Bansari Mayur Kamdar in Bengaluru; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila, Shounak Dasgupta and Aurora Ellis

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