By Christine Idzelis and William Watts
U.S. stocks closed mostly lower Tuesday, with the S&P 500 and Nasdaq Composite falling, after an earnings warning from Snapchat parent Snap triggered losses across the internet sector. The Dow Jones Industrial Average turned higher in late afternoon to end with a slight gain.
How did stocks trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.23% rose 48.38 points, or 0.2%, to close at 31,928.62, climbing for a third straight day.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.36% fell 32.27 points, or 0.8%, to finish at 3,941.48, snapping two straight days of gains.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.35% slumped 270.83 points, or 2.4%, to end at 11,264.45, its lowest close since Nov. 3, 2020.
U.S. stocks finished higher on Monday , with the Dow surging 618.34 points, or 2%, to 31,880.24. The S&P 500 rose 1.9%, while the Nasdaq Composite gained 1.6%.
What drove the markets?
Major U.S. stock benchmarks ended mostly lower Tuesday, in a bruising session for technology-related stocks.
The sharp drop booked by the tech-heavy Nasdaq Composite added to big losses so far this year. The Nasdaq is down 28% in 2022, and has fallen nearly 30% below its record close of 16,057.44 on Nov. 19, 2021, according to Dow Jones Market Data.
“Tech is getting the worst of it” Tuesday after social-media company Snap Inc. delivered an earnings warning in a slowing economy, said Paul Nolte, portfolio manager at Kingsview Investment Management, by phone. Nolte said that he expects the U.S. may fall into a recession in six months to 18 months.
Snap /zigman2/quotes/205087158/composite SNAP -0.70% shares plummeted 43.1% Tuesday, following the company’s warning late Monday that it would likely miss quarterly estimates as the economy has “deteriorated further and faster than anticipated.”
“That’s stopped all the ‘worst is over’ pundits in their tracks. It highlights how fleeting swings in sentiment are now and that investors are running at the first sign of trouble,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.
Other social-media companies that rely on advertising as a revenue stream were also battered, with Facebook parent Meta Platforms Inc. dropping 7.6%, Pinterest Inc. /zigman2/quotes/211319641/composite PINS -2.47% tumbling 23.6%, Google parent Alphabet Inc. /zigman2/quotes/205453964/composite GOOG +1.16% /zigman2/quotes/202490156/composite GOOGL +1.16% sliding nearly 5% and Twitter Inc. /zigman2/quotes/203180645/composite TWTR -0.44% falling more than 5%.
The technology sector has particularly suffered this year as shares of companies that shot to popularity during the pandemic have retrenched amid a shifting economy. Also extremely sensitive to interest rates, the sector has been unraveling in anticipation of the Federal Reserve raising rates to combat high inflation.
“The market continues to turn itself inside out and back to front as it tries to decide if it has priced all of the impending rate hikes, soft landing or recession, inflation or stagflation, China, Ukraine, U.S. summer driving season, supply chains, the list goes on. The result is a day-to-day chopfest, and it seems clear that volatility is the winner,” said Halley.