U.S. stocks ended lower and bond yields slumped Friday, as investors picked through a disappointing quarterly earnings report from message app maker Snap Inc., its ripple-effect on social media stocks and the ongoing uncertainty linked to global economic growth.
Snap (SNAP), which makes the popular Snapchat messaging app, posted its slowest revenue growth rate on record late Thursday and cautioned that companies are pulling back sharply on ad spending amid the global slowdown.
Snap added the current quarter revenues are essentially flat, citing the broader macro slowdown and the impact of Apple Inc.'s (AAPL) privacy changes, which prevent user tracking, on its ad business.
The warning trimmed hundreds of millions in value from social media stocks, including big tech giants Google (GOOGL) and Meta Platforms (META), while reminding investors of the challenges that continue to face most companies over the second half of the yeas supply chains remain tangled, input costs continue to surge and demand begin to wane.
Underscoring that concern was data from Europe showing that overall economic activity likely contracted in the month of July as inflation surged to a record high 8.6% and sentiment was pounded by both the ongoing war in Ukraine and political turmoil in Italy.
S&P Global's flash Composite PMI survey fell to 49.4 over the month -- below the 50 point mark that typically separates growth from contraction -- setting up the possibility of recession in the world's biggest economic bloc as the European Central Bank signals more interest rate hikes to come following the first increase in its benchmark refinancing rate in more than a decade yesterday.
"The euro zone economy looks set to contract in the third quarter as business activity slipped into decline in July and forward-looking indicators hint at worse to come in the months ahead," said S&P Global's chief economist Chris Williamson.
Recession concerns are evident in the U.S., as well, where the Treasury yield curve remains deeply inverted, as bond prices continue to rise in defensive trading and 2-year notes falling hard, to 2.989%, while 10-year notes were pegged at 2.796% in New York dealing.
Bank of America's closely-tracked Flow Show report, in fact, indicates that cash is flowing into bond markets at nearly twice the rate of stocks, with fixed income portfolios adding $8.2 billion this week.
The CME Group's FedWatch, meanwhile, continues to suggest a firm 75 basis point rate hike from the Fed next week, with around a 22.5% chance of a 100 basis point increase following the bigger-than-expected ECB rate decision on Thursday.
Stocks held their ground in the morning, however, with Europe's Stoxx 600 rising 0.31% by the close of trading in Frankfurt, following on from a modestly positive session in Asia and a seven-day rally for the Nikkei 225 in Tokyo that lifted the benchmark to a six-week high
On Wall Street, however, the S&P 500 ended off 1.1% while the Dow Jones Industrial Average fell 199, but got support from a big gain in American Express (AXP).
Amex rose 2.4% after it posted better-than-expected second quarter earning s, while boosting its full-year revenue growth forecast, as a rebound in business and leisure travel trigged record cardmember spending.
The Nasdaq fell 225 points as tech stocks took a hit from Snap shares, the the biggest pre-market mover, as they fell 40% by the end of trading.
Google parent Alphabet shares ended 5.6% lower at $107.90 while Meta Platforms fell 7.6% to $169.27, extending the stock's year-to-date decline to around 50%.
Twitter (TWTR) shares ended up 0.8% after sliding earlier in the session. Twitter posted a surprise second-quarter loss that it linked in part to the uncertainly over Elon Musk's disputed $44 billion takeover.
Verizon Communications (VZ) shares were also lower, falling 6.7% after it posted weaker-than-expected second quarter earnings, while trimming its full-year profit forecast, as price hikes look to have slowed wireless subscriber growth.
