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Stock market indices opened lower on Tuesday as a slashed forecast from Snap gave investors another excuse to shed tech shares.
The S&P 500 (SP500) has drifted lower by 1%, the Dow (DJI) is down 0.5%, and the Nasdaq (COMP.IND) is -1.9%.
Social media and digital advertising stocks are slumping after Snap warned on revenue, with shares down sharply.
“$SNAP down 52% YTD before this announcement,” Hightower strategist Stephanie Link tweeted. “Now another 25%? Why Price/Sales valuations are impossible metrics.”
“These are pretty binary markets at the moment,” Deutsche Bank’s Jim Reid said. “If the US doesn’t fall into recession over the next 3-6 months then it’s easy to see markets rallying over this period. However if it does, the correction will likely have further to run and go beyond the average recession sell-off (that we were close to at the lows last week) given the rich starting valuations.”
Cash is moving to bonds. The 10-year Treasury yield is down 6 basis points to 2.80%. The 2-year is down 5 basis points to 2.58%.
“We doubt that the 10-year Treasury yield has peaked in this cycle,” Capital Economics’ James Reilly wrote. “Looking under the hood, most of the decline in the 10-year yield over the past couple of weeks seems to have been driven by lower inflation compensation.”
“Even if inflation compensation were to fall further in the near term, we suspect that this would be more than offset by a rise in real yields, which we think have room to rise much further amid ongoing Fed tightening. The upshot is that we expect the 10-year Treasury yield to climb higher still.”
On the economic front, April new home sales figures arrive shortly after the start of trading. Economists expect a drop to a rate of 750K.
“The April new home sales report today ought to bring yet more evidence – not that we need any persuading – that housing market activity is rolling over,” Pantheon Macro said. “Whatever the Census Bureau reports today, though, the underlying picture in the new homes market clearly is deteriorating by the day, thanks to the surge in mortgage rates.”
Fed chief Jerome Powell speaks at midday, but they will be pre-recorded welcoming remarks and unlikely to move markets.
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