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The revelation that Snap would not hit some of its own revenue and income forecasts caused drops in the S&P 500 and Nasdaq indexes.
The S&P 500 and Nasdaq Composite both declined on Tuesday following a grim warning by the camera and social media platform Snap (NYSE: SNAP). Snap Inc also saw its shares sink 43% after announcing that it would probably miss earnings and revenue targets for the ongoing quarter. In addition, the California-based company also stated that there would be a steep decline in hiring.
The gloomy forecast Snap provided swept through much of the tech space, with Meta Platforms (NASDAQ: FB) and Alphabet (NASDAQ: GOOGL) also impacted. Meta slumped 7.6%, while Google parent Alphabet saw its stock fall approximately 5%, hitting a new 52-week low. In addition, Amazon (NASDAQ: AMZN) also dropped to a new 52-week low as its shares concluded the day 3.2% lower. Furthermore, consumer electronics powerhouse Apple (NASDAQ: AAPL) also declined 1.9% during the same trading session.
The broader market also suffered as the tech-heavy Nasdaq dipped 2.4% to 11,264.45 while the S&P 500 retraced 0.8% to 3,941.48. Conversely, the Dow Jones Industrial Average (DJIA) inched 48.4 points (0.2%) upward to 31,928.62. This represents a substantial turnaround for the Dow because it had initially dropped 1.6% earlier in the trading session.
The Dow’s fortunes received a major helping hand from UnitedHealth Group’s 1.1% ascension prior to the close. In addition, components of the blue-chip stock index such as IBM (NYSE: IBM), McDonald’s (NYSE: MCD), and Verizon (NYSE: VZ) all gained by more than 2% during the trade.
Analysts Offer Reasoning to the Snap-induced S&P 500, Nasdaq Slump
Commenting on the Snap earnings problem, Adam Crisafulli of Vital Knowledge stated:
“Some are a bit incredulous that a relatively small and perennially unprofitable ephemeral social media firm can take down the whole tape, but given how sensitive this tape is, SNAP is able to punch above its weight.”
In addition, the founder and president of Vital Knowledge also added:
“Tech still dominates the market, both numerically (it remains the biggest weighting) and psychologically, and despite aggressive liquidation in the last couple of months, people still own a lot of it.”
Analysts at Morgan Stanley also chipped in the aftermath of the Snap warning. According to them, all online ad platforms may experience some kind of impact, including customer pullback.
Rising Inflation & Hiked Interest Rates
The current inflationary threat in the US financial landscape has spawned a lot of talking points. Several market stakeholders have provided varying opinions on how the Federal Reserve should address the situation. In a series of tweets on Tuesday, billionaire hedge fund manager Bill Ackman supported the Fed’s decision to aggressively increase interest rates to arrest inflation. Furthermore, the hedge fund manager also said that investors would have to deal with this recourse inevitably. Ackman says this is the only way to avoid a full-on market collapse. According to him, “if the Fed doesn’t do its job, the market will do the Fed’s job, and that is what is happening now.”