Big tech stocks slump in wake of Snap profit warning

Big tech stocks slump in wake of Snap profit warning

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Tech stocks took a big tumble Tuesday as investors bailed from dozens of companies that rallied at the height of the COVID-19 pandemic.

The tech-heavy Nasdaq Composite index fell amid investor fears of a slowdown in the digital advertising sector, following a profit warning by social media firm Snap Inc. The company, which also said it’s planning to slow hiring and spending, saw its stock lose 43% of its value, its largest single-day decline on record.

Snap’s stock is now down 85% from its September 2021 all-time high and its plummeting value quickly rubbed off on other tech stocks. Facebook parent company Meta Platforms Inc. sank 7.6%, while Google’s parent Alphabet Inc. fell 5.1%. Another tech giant, Inc., fell 3.2%. Overall the Nasdaq fell 2.3% during the day, compared to a 0.8% decline in the S&P 500 and a 0.2% gain in the Dow Jones Industrial.

Due to their lofty values, tech stocks tend to have an outsized influence on the wider financial market. As a result, the technology industry has been blamed for much of the volatility that has hit stock markets in recent weeks, along with the broad decline of all three major indexes since April. The pullback followed a broad rally just one day earlier, underscoring the wild swings that characterize the stock markets at present.

Dozens of smaller tech firms were affected by the downturn too. Social media giant Twitter Inc. fell 5.5%, cloud database firm Snowflake Inc. was down 6.6% and communications provider Twilio Inc. fell 7.9%

Adam Crisafulli of Vital Knowledge said in a note that Snap was the main culprit behind Tuesday’s market decline. “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,” he said.

A few tech firms did manage to buck the trend, with IBM Corp.’s stock posting a 2.1% gain, Hewlett-Packard Enterprise Co. up less than 1%, and the chipmaker GlobalFoundries Inc. rising 1.7%.

Nonetheless, today’s decline means the Nasdaq index has now fallen almost 30% from its peak last year, amid an aggressive campaign of rate increases by the Federal Reserve to fight inflation. Fears over tech stocks have also pushed the benchmark S&P 500 closer to bear market territory, which is officially declared when an index falls 20% from its most recent record high. At the day’s end, it was down 18% from a record high set earlier this year.

The market is bracing itself for yet more volatility in the coming days as a number of big tech firms have earnings reports scheduled, beginning with chipmaker Nvidia Corp. on Wednesday.

Photo: nakashi via Flickr

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