U.S. Stocks Offsetting Yesterday’s Rally After Warning From Snap

After ending the previous session sharply higher, stocks have shown a substantial move back to the downside during trading on Tuesday. With the pullback, the major averages have largely offset yesterday’s strong gains.

Currently, the major averages are just off their worst levels of the day. The Dow is down 417.57 points or 1.3 percent at 31,462.67, the Nasdaq is down 388.08 points or 3.4 percent at 11,147.20 and the S&P 500 is down 85.93 points or 2.2 percent at 3,887.82.

A steep drop by shares of Snap Inc. (SNAP) is weighing on the markets, with the Snapchat parent plummeting by nearly 40 percent to a two-year intraday low.

The plunge by Snap comes after the company warned of weaker than expected second quarter results, saying the “macroeconomic environment has deteriorated further and faster than anticipated.”

Weakness overseas has also carried over onto Wall Street, as a broad package of Chinese measures to support the economy underwhelmed investors.

The sharp pullback also comes amid lingering concerns aggressive interest rate hikes by the Federal Reserve could lead to a recession.

On Wednesday, the Fed is due to release the minutes from its latest monetary policy meeting, which may shed additional light on the outlook for rates.

Adding to the negative sentiment on Wall Street, the Commerce Department released a report showing a much steeper than expected drop in new home sales in the month of April.

The report showed new home sales plunged by 16.6 percent to an annual rate of 591,000 in April after tumbling by 10.5 percent to a revised rate of 709,000 in March.

Economists had expected new home sales to slump 1.7 percent to a rate of 750,000 from the 763,000 originally reported for the previous month.

With the much bigger than expected decrease, new home sales dropped to their lowest annual rate since hitting 582,000 in April of 2020.

Airline stocks have shown a substantial move to the downside on the day, resulting in a 4 percent nosedive by the NYSE Arca Airline Index.

The disappointing new home sales data is also contributing to considerable weakness among housing stocks, with the Philadelphia Housing Sector Index plunging by 3.4 percent.

Significant weakness has also emerged among brokerage stocks, as reflected by the 3.1 percent slump by the NYSE Arca Broker/Dealer Index.

Computer hardware, retail and banking stocks are also seeing notable weakness, while gold stocks are among the few groups bucking the downtrend amid an increase by the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan’s Nikkei 225 Index slid by 0.9 percent, while China’s Shanghai Composite Index plunged by 2.4 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index has dipped by 0.3 percent, the French CAC 40 Index and the German DAX Index are down by 1.4 percent and 1.6 percent, respectively.

In the bond market, treasuries have moved sharply higher, more than offsetting the pullback seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 12.4 basis points at 2.735 percent.

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