Wall Street sinks as Amazon, Alphabet earnings spark growth concerns

Wall Street sinks as Amazon, Alphabet earnings spark growth concerns

(Reuters) - U.S. stocks plunged on Friday as grim earnings reports from Amazon and Alphabet rekindled a rush to dump technology and high-growth stocks, but data showing economic growth in the last quarter slowed less than expected provided some relief.

FILE PHOTO - Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 24, 2018. REUTERS/Brendan McDermid

The Nasdaq dropped nearly 2 percent, sharply cutting its gains for the year and moving deeper into correction territory, while the blue-chip Dow shed 1.1 percent and the benchmark S&P fell 1.56 percent, putting under threat their slim gains for the year.

Amazon.com Inc (AMZN.O) tumbled 7.1 percent after it not just missed quarterly sales estimates, but also gave a below par holiday-season sales forecast.

Google-parent Alphabet Inc (GOOGL.O) sank 3.3 percent after its revenue missed estimates, fanning concerns that investments in new businesses, rising regulatory scrutiny and competition are producing slow returns.

That triggered a sell-off in other members of the so-called FAANG group. Both Facebook Inc (FB.O) and Netflix Inc (NFLX.O) dropped 2.3 percent and Apple Inc slid (AAPL.O) 1.5 percent.

All of the 11 major S&P sectors were in the red, with the communication services .SPLRCL taking the steepest hit with a 2.06 percent fall and technology stocks .SPLRCT down 1.48 percent.

“When the stocks that are carrying the markets begin to crack, investors are going take cover. Investors are waiting for more visibility for things to see where the rotation takes them,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

On the brighter side was data that showed gross domestic product increased at a 3.5 percent annualized rate in the third quarter as a tariff-related drop in soybean exports was partly offset by the strongest consumer spending in nearly four years and a surge in inventory investment.

“This is seen as a slight positive. There’s less pressure on the Federal Reserve to do something (on interest rates),” Bakhos said.

While U.S. economic growth kept apace despite trade wars, the same cannot be said of U.S. corporate profit growth, as a slew of disappointing forecasts this earnings season showed how tariffs, rising wages and borrowing costs as well as jitters over geopolitical events are hurting companies.

At 9:56 a.m. EDT the Dow Jones Industrial Average .DJI was down 274.85 points, or 1.10 percent, at 24,709.70, the S&P 500 .SPX was down 42.12 points, or 1.56 percent, at 2,663.45 and the Nasdaq Composite .IXIC was down 144.96 points, or 1.98 percent, at 7,173.38.

A clutch of weak outlook on Wednesday pushed the Nasdaq into correction territory and erased the Dow and the S&P 500’s gains for the year. On Thursday, Microsoft Corp’s (MSFT.O) strong earnings led a rally that pulled the S&P and Dow back into the black for 2018.

Microsoft, whose strong results helped push the Nasdaq to its biggest daily gain since March just a day earlier, fell 1.2 percent.

Intel Corp (INTC.O) defied weakness to gain 3.6 percent after its better-than-expected quarterly results, though interim Chief Executive Officer Bob Swan said trade tensions with China could be a “headwind” next year.

Declining issues outnumbered advancers for a 5.14-to-1 ratio on the NYSE and a 3.38-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 51 new lows, while the Nasdaq recorded three new highs and 173 new lows.

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