The Nasdaq and S&P 500 indexes fell on Friday following a glum quarterly earnings report from Amazon.com, while data showing a strong rise in June consumer spending reinforced optimism about a steady economic rebound.
Amazon.com Inc sank 6.9 percent, tracking its worst day since March 2020, after the company said sales growth would slow in the next few quarters as customers ventured more outside the home.
Shares of other technology behemoths – including Apple Inc, Google parent Alphabet Inc, and Facebook Inc, which benefitted last year from people staying indoors due to COVID-19 curbs – fell between 0.6 percent and 1.8 percent.
“Expectations across the board were quite high for corporate earnings and the reason we are seeing some of the shares drop despite positive results is because people expect exponential growth, which to be honest is too high to expect,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
Hopes of a steady post-pandemic rebound in the US economy have put the benchmark index on course for its sixth straight monthly gain, but the rapid spread of the Delta variant of the coronavirus and rising inflation have kept sentiment in check.
Data on Friday showed United States consumer spending rose more than expected in June, but part of the increase reflected higher prices, with annual inflation accelerating further above the Federal Reserve’s 2 percent target.
“People were obviously worried last night with Amazon missing on the top line [estimates], but the spending is still there, it has just transferred from spending online to more experiential services,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.
“It shows that consumers are spending their money and not hoarding it as they would do if they were worried about economic prospects.”
Earlier this week, the Fed reiterated its view that higher inflation would be transient.
By 12:06pm ET (16:06 GMT), the S&P 500 was down 0.53 percent, the Nasdaq Composite Index was down 0.68 percent and the Dow Jones Industrial Average was down 0.39 percent.
Economically sensitive stocks including industrials, energy and financials fell, but for the week, the so-called value stocks were set to outperform growth-linked stocks such as technology.
“We are bullish about cyclicals and consumer spending,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
“Cyclical sectors are likely to continue to expand and consumer spending is going to increase. Restaurants and specialty retail are two areas for which we have a pretty optimistic scenario.”
Procter & Gamble Co rose 2.8 percent as it forecast higher core earnings for this year, while US-listed shares of Canada’s Restaurant Brands International Inc jumped 4.7 percent after the Burger King owner beat estimates for quarterly profit.
Pinterest Inc plunged 19.2 percent to its lowest in more than two months after saying US user growth was decelerating as people who used the platform for crafts and do-it-yourself projects during the height of the pandemic were stepping out more.
Caterpillar Inc reversed course to fall 3.8 percent. The company posted a rise in second-quarter adjusted profit on the back of a recovery in global economic activity.
Overall, second-quarter results have come in from about half of the S&P 500 companies, of which nearly 91 percent have beaten profit estimates, according to Refinitiv data.
Declining issues outnumbered advancers 1.48-to-1 on the NYSE and 1.43-to-1 on the Nasdaq.
The S&P index recorded 56 new 52-week highs and one new low, while the Nasdaq recorded 67 new highs and 61 new lows.