Day Traders Diary
The major averages pulled back on Friday, but finished the week higher, as investors digested disappointing results from Snap that sent social media shares reeling. The Dow Jones Industrial Average lost 137 points, or 0.43%. The S&P 500 declined 37 points or 0.93%, while the Nasdaq Composite traded down 225 points or 1.87%.
Those losses cut into weekly gains for all three major averages, with the Dow closing out the week 2% higher. The S&P 500 advanced 2.6%, and the Nasdaq capped the week up 3.3%.
An earnings miss from Snap, which sent shares tumbling 38%, halted this week's Nasdaq rally. Traders, eyeing some better-than-expected results from tech companies, had deliberated whether markets had finally found a bottom.
The results from the Snapchat parent were followed by a slew of analyst downgrades on the stock. Snap's quarterly report also weighed on other social media and tech stocks, which investors feared could face slowing online advertising sales.
Shares of Meta Platforms and Pinterest fell 7% and 14%, respectively, while Alphabet lost more than 5%.
Twitter rose slightly despite reporting disappointing second-quarter results that missed on earnings, revenue and user growth. The social media company blamed challenges in the ad industry, as well as "uncertainty" around Elon Musk's acquisition of the company, for the miss.
Verizon was the worst-performing member of the Dow after reporting earnings. The wireless network operator dropped more than 7% after cutting its full-year forecast, as higher prices dented phone subscriber growth.
Nearly 21% of S&P 500 companies have reported earnings so far. Of those, 70% have beaten analyst expectations, according to FactSet.
Meanwhile, concerns over the state of the U.S. economy also weighed on sentiment after the release of more downbeat economic data. A preliminary reading on the U.S. PMI Composite output index — which tracks activity across the services and manufacturing sectors — fell to 47.5, indicating contracting economic output. That's also the index's lowest level in more than two years.
The report comes a day after the U.S. government reported an unexpected uptick in weekly jobless claims, raising questions about the health of the labor market.
Still, Wall Street has enjoyed a strong week for markets, as traders absorbed second-quarter results that have come in better than feared. On Friday, the S&P 500 touched the 4,000 level, which it hasn't hit since June 9, before coming back down.
The Dow got a boost earlier in the session following a robust earnings report from American Express. The credit card company jumped 2% after beating analyst expectations, because of record consumer spending in areas such as travel and entertainment.
To be sure, some market participants do not believe the bear market is over despite this week's gains. Since World War II, nearly two-thirds of one-day rallies of 2.76% or more in the S&P 500 occurred during bear markets, with 71% occurring before the bottom was in, according to a note this week from CFRA's Stovall.
Stovall believes the broader market index could rally as high as the 4,200 level before coming back down to challenge June lows.
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