U.S. stock markets closed mixed on Tuesday after a choppy session. The meltdown of the technology sector continues. Investors remained concerned about an impending recession of the U.S. economy. The S&P 500 and the Nasdaq Composite ended in negative territory while the Dow finished in the green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.2% to close at 31,928.62. Notably, 18 components of the 30-stock index ended in positive territory while 12 in negative zone. The blue-chip index fell 1.6% at its low in intraday trading.
The tech-heavy Nasdaq Composite finished at 11.264.45, plummeting 2.4% or 270.83 points due to the strong performance of large-cap technology stocks. The tech-laden index posted its lowest close since Nov 3, 2020. Moreover, the index is currently in bear market.
Meanwhile, the S&P 500 dropped 0.8% to end at 3,941.48. Five out of 11 broad sectors of the benchmark index closed in positive zone while six ended in red. The Communication Services Select Sector SPDR (XLC), the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) plunged 3.6%, 2.6% and 1.5%, respectively. On the other hand, the Consumer Staples Select Sector (XLP), the Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) rallied 1.6%, 2% and 1.2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 3.4% to 29.45. A total of 11.78 billion shares were traded Tuesday, lower than the last 20-session average of 13.33 billion. Decliners outnumbered decliners on the NYSE by a 1.28-to-1 ratio. On Nasdaq, a 2.37-to-1 ratio favored declining issues.
Snap Sends Shock Wave to Technology Sector
On May 23, after the closing bell, Snap Inc.’s (
SNAP Quick Quote SNAP - Free Report) CEO Evan Spiegel warned in a note to employees that the social media company will miss its targets for revenue and adjusted earnings in the ensuing second-quarter 2022. Spiegel said “the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month.”
Spiegel’s warning sends a shock wave across Wall Street. Most of the stock analysts and financial researchers have opined that this is not an isolated phenomenon for the company. The companies that depend most on advertising revenues are likely to suffer going forward.
Accordingly, shares of social media giants Meta Platforms Inc. , Alphabet Inc. (
GOOGL Quick Quote GOOGL - Free Report) and Twitter Inc. ( TWTR Quick Quote TWTR - Free Report) have tumbled 7.6%, 5% and 5.6%, respectively. All four stocks carry a Zacks Rank #3 (Hold). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Snap’s warning is considered by several economists that the U.S. economy is slowing down. Last week, a number of retail behemoths have warned that mounting inflation, prolonged supply-chain disruptions and labor shortage are denting their profits.
Moreover, the Fed has decided to aggressively hike interest rate. This will raise the cost of borrowing for businesses. Higher prices of final products will reduce the aggregate demand, the major growth driver of the U.S. economy.
The yield on the benchmark 10-Year U.S. Treasury Note fell to 2.73% from 3.23% at the beginning of this month. Investors are gradually dumping risky assets like equities and opting for safe-haven government bonds. As a result, bond prices and increasing resulting in falling yields.
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that new home sales in April came in at 591,000 units, well below the consensus estimate of 747,000 units. Moreover, the data for March was revised downward to 709,000 units from 763,000 units reported earlier.