Wall Street closed lower on Friday terminating a three-day winning streak. Investors were concerned as shares of social media and ad tech companies nosedived. Market participants remained skeptical regarding the U.S. economic growth following a disappointing economic data. All three major stock indexes ended in negative territory. However, for the week as a whole, these indexes have rallied impressively.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) dropped 0.4% or 137.61 points to close at 31,899.29.  Notably, 19 components of the 30-stock index ended in negative territory while 11 in green. The tech-heavy Nasdaq Composite finished at 11,834.11, sliding 1.9% or 225.50 points due to weak performance of large-cap technology stocks.

The S&P 500 fell 1% to end at 3,961.36. At intraday session, the broad-market index briefly crossed the psychological barrier 4,000 for the first time since Jun 9. Three out of 11 broad sectors of the benchmark index closed in positive zone while eight ended in red.

The communication Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLK) plummeted 3.5% and 1.4%, respectively. On the other hand, the Utilities Selected Sector SPDR gained 1.4%.

The fear-gauge CBOE Volatility Index (VIX) was down 0.4% to 23.03. A total of 10.38 billion shares were traded Friday, lower than the last 20-session average of 11.53 billion. Decliners outnumbered advancers on the NYSE by a 1.43-to-1 ratio. On Nasdaq, a 2.49-to-1 ratio favored declining issues.

Snap Pulls Down Ad-Tech Firms

Social Media giant Snap Inc. (SNAP Quick QuoteSNAP - Free Report) , the developer of the Snapchat platform, reported a highly disappointing second-quarter 2022 earnings results. Adjusted loss per share of $0.02 was double the consensus estimate of a loss per share of $0.01. Revenues of $1.11 billion was lower than the consensus estimate of $1.14 billion.

Adjusted operating profit plunged 97% to a mere $7.1 million. Free cash flow was a negative $147 million. At the end of the second quarter, the company had 347 million daily active users, beating the consensus estimate of 343.2 million.

Consequently, shares of Snap crashed 39.1% to $10. Moreover, shares of social media behemoth and Facebook owner Meta Platforms Inc. (META Quick QuoteMETA - Free Report) and tech-super power Alphabet Inc. (GOOGL Quick QuoteGOOGL - Free Report) that owns Google tumbled 7.65 and 5.6%, respectively, due to investors’ concern of a significant decline in digital-advertising space. Both Meta and Alphabet carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Concerns Regarding Recession

Market participants remained highly concerned regarding a near-term recession of the U.S. economy owing to mounting inflationary pressure, tighter monetary control and a higher interest rate regime by the Fed and slowing consumer enthusiasm.

As a result, investors have shifted funds from risky assets like equities to safe-haven government bonds. Consequently, the yield on the benchmark 10-Year U.S. Treasury Note fell 12.7 basis points to 2.781%, its lowest since May 27. Future price of the U.S. oil benchmark – the WTI crude – settled 1.7% lower at $97.57 a barrel, on concerns of lack of demand.

Economic Data

The S&P Global Market U.S. Flash Composite Purchasing Managers’ Index for July came in at 47.5%. Any reading below 50% indicates contraction in economic activities. This marked the biggest contraction in services and manufacturing activity since the beginning of the pandemic.

Weekly Roundup

Last week was a strong one for Wall Street. The Dow and the S&P 500 advanced 2% and 2.6%, respectively, recording their best weekly performance since the week ended Jun 24. The Nasdaq Composite surged 3.3%. better-than-expected second-quarter earnings results were the primary driver for Wall Street rally.