U.S. Stocks Slide After Amazon Posts Quarterly Loss

Dow Falls More Than 500 Points After Amazon’s Quarterly Loss

A tumble in shares of Amazon.com and other technology stocks helped push the S&P 500 lower Friday and toward its worst month since March 2020.

The broad stock market index fell 2.4%, with losses accelerating midday, and the Dow Jones Industrial Average declined more than 500 points, or 1.7%. The technology-focused Nasdaq Composite dropped around 2.9%.

The tumultuous week, dotted with earnings results from some of the biggest U.S. companies, caps off a rough stretch for major indexes. The Nasdaq Composite is down about 12% this month, continuing a punishing stretch of losses to start the year. The S&P 500 has fallen 7.7% in April. Both indexes are off to their worst start to a year in decades.

Worries about the Federal Reserve raising interest rates, soaring inflation and the path of the economy have brought stocks sharply lower from the records they kicked off the year with. Many pandemic-era winners have also come falling back to earth as consumer tastes have evolved since 2020. Recently, earnings season has been dotted with some high-profile disappointments from the group, delivering headspinning moves after the reports.

Throughout the month, investors have ditched shares of some of the biggest tech companies, which had been stock-market darlings for much of the past decade and led the market higher from its March 2020 lows. Very quickly, some of the most reliable winners of the past few years have turned into losers, dragging the market lower.

The FAANG stocks, consisting of the popular quintet of Facebook-parent

Meta,

Apple, Amazon.com,

Netflix

and Google-parent

Alphabet,

have collectively lost more than $1 trillion in market value this month, the most since Facebook started trading in May 2012.

Amazon shares fell 14% in afternoon trading, on track for the biggest one-day drop since at least 2014. The company posted its first quarterly loss in seven years—a result that reflected broad economic trends related to a slump in online shopping, higher costs from inflation and supply-chain woes, and market jitters over electric-vehicle startups.

Apple cautioned Thursday that the resurgence of Covid-19 in China threatens to hinder sales by as much as $8 billion in the current quarter. Shares were down 0.7% in recent trading. Last week, Netflix shares tumbled more than 30% after the earnings report showed the company lost subscribers. Moves in large technology companies can have outsize impacts on major stock indexes due to their higher weighting relative to other stocks.

“We’re going into a higher volatility regime, when fundamentals matter again,” said Aashish Vyas, investment director at Resonanz Capital. “It does seem like we are at a systemic shift.”

Of course, some of the companies have impressed investors with their latest reports. Investors cheered a solid earnings report from Meta Platforms, helping it recoup some of its losses this year, though the stock remains down almost 40% for 2022.

For much of the month, many traders and market watchers remained fixated on the drama surrounding Twitter, as Tesla Chief Executive

Elon Musk

took a stake in the company and then reached a deal to buy it. The tweets and negotiations throughout the process spurred intense volatility in shares of both companies. Twitter shares are up 29% this month, while Tesla shares have shed 16%.

Most recently, shares of Tesla added 4.3% after Chief Executive Elon Musk disclosed that he recently sold about $4 billion worth of shares in the electric-car maker to fund his takeover of Twitter but said that no further sales are planned.

Traders working on the floor of the New York Stock Exchange. Friday’s stock losses continue a volatile stretch for major indexes, and tech shares in particular.



Photo:

BRENDAN MCDERMID/REUTERS

Many investors have grown more concerned about a recession, driving swings across global markets. The war in Ukraine has driven commodity prices higher when inflation has already been at a 40-year high. Meanwhile, the Federal Reserve has embarked on a path to raise interest rates, but it faces an especially tricky path to tame inflation while not substantially raising unemployment.

The latest gross domestic product data showed that the economy recently contracts, flashing a warning sign.

In economic data, the Fed’s preferred measure of inflation, the personal-consumption-expenditures index measure of core inflation, which excludes volatile food and energy costs, rose 5.2% in March from one year earlier. U.S. consumer spending for March increased 1.1% from the prior month.

“The reality is that weeks into this lockdown, we’re going back to supply-chain disruptions which could impact inflation and which could put central banks in tough positions,” said

Esty Dwek,

chief investment officer at FlowBank. “We’d seen the beginning of improvements in supply chains but that’s likely to reverse if these lockdowns in China last longer.” 

The giant swings haven’t been contained to just tech stocks. The broad S&P 500 has tumbled around 11.5% this year, on track for its worst four months to start a year since 1942. Investors around the globe have also been alarmed by the dramatic moves in assets from currencies to bonds.

In bond markets, the yield on the benchmark 10-year Treasury note is on track to notch its biggest monthly gain since 2009. It recently hovered at 2.906%.

In currency markets, the dollar has been soaring while the yen has been crashing. The yen, a typical safehaven for investors around the globe, has been tumbling to a 20-year-low against the dollar, upending the typical dynamics across global markets and stirring unease among investors.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.4% Friday but has strengthened against other currencies this year in anticipation of Fed rate increases, which are expected to happen faster and more aggressively than in the eurozone and Japan.

Brent crude, the international benchmark for oil, added 1.6% to $108.96 a barrel in recent trading. Moscow’s cutting off of gas supplies to some nations has worried traders of further disruptions as European countries try to move away from Russian energy. 

Overseas, the pan-continental Stoxx Europe 600 added 0.7%.

In Asia, Alibaba and other Chinese technology stocks jumped by double-digit percentages on investor hopes that China’s government would do more to support the sector and the wider economy. The surge helped Chinese shares recoup some of their recent losses, while the yuan also clawed back some ground against the dollar after selling off sharply in recent sessions.

Hong Kong’s Hang Seng Index gained 4%. The Shanghai Composite index rose 2.4%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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