After closing higher on Monday, the indexes reversed lower with the Nasdaq leading on the downside in afternoon trading Tuesday. Technology stocks were weighed down by a disappointing outlook from Snap. The social media platform crashed over 40% on Tuesday.
Early Tuesday, the Composite Purchasing Managers' Index came in below economists' estimates, according to Econoday. The flash composite index for May was 53.8, down from 56 in April and below the consensus estimate of 55.5. The rate of growth was the slowest in four months, and the index is now below the long-term average of 54.8, S&P Global commented.
The survey's manufacturing index of 57.5 also missed expectations of 58.9. The services index of 53.5 was below estimates of 55.3.
Nasdaq Weighed Down By Snap Stock Crash
At around 1:30 p.m. PT, the Dow Jones Industrial Average traded down 1% before trimming that loss. The S&P 500 was down around 1.4%. Meanwhile, the small-cap Russell 2000 slumped 2.6% while the Nasdaq led the downside with a 3.1% loss.
According to IBD data, volume was running higher on the Nasdaq and on the NYSE vs. the same time on Monday.
Monday's bullish action was overshadowed by weak volume, which indicated that institutional investors were holding off on buying. On Tuesday, most of the S&P 500 sectors traded lower. The Communication Services Select Sector SPDR ETF led the downside with almost a 4% slump. The utilities and consumer staples sectors were the only ones trading higher.
Among IBD's industry groups, several retail-related groups led on the downside. Internet content also lagged, down 6.7%. The internet content group houses social media giant Snap, as well as other content platforms like Twitter, Facebook parent Meta Platforms, Yelp and more. Of the three, only Meta trades on the Nasdaq.
Snap tumbled nearly 42% in very heavy volume, placing it on track for its biggest single-day drop on record. Shares are also trading below the IPO price of $17. The company significantly lowered its Q2 profit outlook, warning investors about changes in market conditions.
"Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated," Snap wrote in an SEC filing.
Shares of Twitter and Meta traded lower in sympathy with Snap, down 4% and 8%, respectively.
Housing Stocks Fall On Economic News
Sales of new single-family homes in April 2022 dropped 16.6% to a seasonally adjusted annual rate of 591,000. This was below the revised March 2022 estimate of 709,000, according to the U.S. Census Bureau, and represented the fourth consecutive month of declines. Meanwhile, 30-year fixed mortgage rates passed 5% for the first time since the Great Recession in 2009.
Outside the Nasdaq, iShares U.S. Home Construction ETF fell 3.3%. Building products supplier Builders FirstSource fell more than 5% while Atkore lost over 7%.
Shares of Atkore fell below support at the 50-day moving average on Tuesday, a negative sign.
Follow Rachel Fox on Twitter at @IBD_RFox for more Dow Jones and stock market commentary.
