Social media companies are tumbling after the disappointing revenue concerns were raised by Snap Inc. about the outlook for online advertising. Snapchat (SNAP) is down by over 35 per cent , while Pinterest is lower by almost 10 per cent. The stock price of META and Twitter which reported second-quarter results yesterday are quoting flat.
Online ad companies have struggled throughout 2022, as investors expect a weaker economic outlook will drag down advertising budgets. In May, Snap cut its forecasts and said a weaker economic outlook was weighing on its ad business.
Verizon Communications Inc. cut its forecast for the second straight quarter, adding to concerns that consumers are pulling back on spending. In another warning sign for the technology sector, Seagate Technology Holdings Plc reported results that missed expectations and gave an outlook that is below the consensus view.
There are growing signs that tech companies are preparing for a recession with some pulling back on hiring, while Meta has lost about half of its value this year after disappointing revenue forecasts.
Focus will now turn to the Fed’s meeting next week, where the central bank is again expected to increase interest rates to tame scorching inflation.
According to Bank of America Corp strategists, investors are perhaps throwing in the towel on stocks if fund flows are looked at. Investors have pulled cash from global equity-focused mutual funds for at least five weeks, according to the bank.
Investors are keeping an eye on inflation and bond yields as well as a change in the Federal Reserve’s hawkish policy before there can be a bull run in stocks.