U.S. technology stocks fell on Tuesday and traders sought refuge in U.S. government debt after social media company Snap became the latest in a series of companies to warn of the intensification of winds against the economy.
The Nasdaq Composite, weighted for large U.S. technology companies, fell as much as 3.8 percent in morning trading in New York. The more balanced S&P 500 was down 2.2%, while Treasury bonds rebounded.
Investors’ nerves were stirred after Snap said on Monday afternoon that “the macroeconomic environment has deteriorated more and more rapidly than expected” since it issued a guide in April. The group said its sales and profits for the current quarter would be below its previous expectations. Shares of Snap plunged 40 percent on Tuesday.
“Snap’s cautious tone creates more downside risk” for other companies with large advertising businesses, JPMorgan analysts said. The sale to Snap put Google’s parent Alphabet down 8 percent on Tuesday, as Facebook owner Meta fell nearly 10 percent. The new losses caused the Nasdaq to fall by almost 30% during the year so far.
Other earnings reports increased the feeling of sadness. Best Buy lowered its year-over-year earnings forecast, while clothing retailer Abercrombie & Fitch lowered its annual and margin sales expectations due to rising costs.
Negative updates came after U.S. consumers Target and Walmart issued similar outlook last week.
“These big companies are telling us that inflation is high and that it is hurting consumer spending,” said Marija Veitmane, a multi-asset strategist at State Street. “Looking at their direction, they don’t think it’s going to improve very quickly either.”
U.S. government bonds rose in price on Tuesday as traders moved to paradise. The 10-year Treasury yield fell 0.13 percentage points to 2.73% in a continuation of a sharp rise over the past two weeks fueled by growth concerns. The two-year yield, which reflects monetary policy expectations, fell 0.14 percentage points to 2.49%.
European and Asian data provided more fodder for investors worried that the war in Ukraine, high levels of inflation and the withdrawal of central banks from economic stimulus measures could derail the global rise of the pandemic.
German companies were “increasing their charges for goods and services to offset the higher cost of energy, fuel, raw materials and personnel,” according to a report accompanying the May Purchasing Managers’ Index. S&P Global for the dominant eurozone economy.
Japanese manufacturing activity is also expanding at a slower pace in three months, according to an equivalent PMI survey for the Asian nation, whose compilers blamed “supply chain disruptions” for “sanctions” imposed on Russia “and blockade measures throughout China.
“The business cycle is likely to slow down rapidly,” said Zehrid Osmani, Martin Currie’s trusted global portfolio manager.
The European regional Stoxx 600 index, which has lost more than a tenth so far this year, fell 1.1%. Hong Kong’s Hang Seng stock index closed 1.8% lower and Tokyo’s Nikkei lost 0.9%.