Stock Market Flips Lower On Company Warnings; This Retailer Plummets| Investor’s Business Daily

Repeating a troubling pattern, the stock market gave back much of the prior day’s rally as more companies and the latest economic data signaled weakening economic conditions.

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The Nasdaq wiped out all of Monday’s 1.6% gain as the composite plummeted 3.4%. The S&P 500 fell 1.9% and also surrendered all of Monday’s rally.

Since April, Nasdaq and S&P 500 rallies have been of short duration, with sell-offs occurring the next day or in just a few days. Tuesday’s decline is the latest example of this bearish trend.

The Dow Jones Industrial Average fell 0.9% as Walt Disney (DIS) stumbled 3%. Volume fell on the Nasdaq and rose on the NYSE compared with the same time on Monday.

Stock Market Fears Grow After Snap Warning

Snap (SNAP) plunged nearly 40% in its worst day ever, according to Dow Jones Market Data. The parent of Snapchat warned that its second-quarter results will miss the company’s targets. It was an unusual announcement for Snap, which on April 21 missed Q1 estimates and warned at that time its revenue was growing more slowly than expected.

In just a matter of weeks, the situation got worse.

“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” the company said in an SEC filing late Monday.

The warning sent chills through Wall Street, which is worried about a recession. Other social media stocks sold off, too. Facebook parent Meta Platforms (FB) and Alphabet (GOOGL) fell nearly 7% each in heavy volume. Twitter (TWTR) — facing an uncertain buyout by Elon Musk — dropped 2%.

Global X Social Media (SOCL), an ETF that tracks the industry, tumbled 8% and is down more than 30% for the year.

Retail Earnings Mainly Soft

After last week’s retail rout, Best Buy (BBY) gave a mixed April-quarter report early today, but the stock rose 2%. The consumer electronics chain met profit estimates as sales rose more than expected. Still, the company’s guidance was cool.

For the full fiscal year, the midpoint of Best Buy’s forecast is for adjusted earnings of $8.70 a share on sales of $49.1 billion. Its previous forecast was for earnings of $9 a share on sales of $50.1 billion. It now expects same-store sales to fall 3% to 6%, from an earlier expected decline of 1% to 4%.

Abercrombie & Fitch (ANF) was another crash this morning for the retail sector. The teen- and young adult-focused apparel chain missed profit estimates and cut its full-year forecast. The stock plummeted 27% to a November 2020 low.

But AutoZone (AZO) climbed 1.7% after the auto parts retailer beat profit, sales and same-store estimates.

The Innovator IBD 50 ETF (FFTY) fell 1.3%. Boise Cascade (BCC) fell below its 50-day moving average, although there’s no sell signal so far.

Economic Data Doesn’t Help Stock Market

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 said.

The survey’s manufacturing index of 57.5 also missed views of 58.9. The services index of 53.5 lagged estimates of 55.3.

“Manufacturers and service providers signaled softer upturns in output amid elevated inflationary pressures, a further deterioration in supplier delivery times and weaker demand growth,” S&P Global noted.

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