Stocks fell across the board Friday following underwhelming earnings and a mixed inflation reading.
Amazon shares shed 7.14% after posting disappointing sales and missing on revenues.
Meanwhile, core-PCE prices registered a 0.4% increase in June, which was less than the expected 0.6%, but still remains elevated when compared to the historical goal of 2% per year. Year-over-year, core prices are up 3.5%, from 3.4% in May. PCE is the Federal Reserve's preferred measure of inflation, so this is the number that traders worried about tighter monetary policy should keep an eye on.
Personal Spending and Income were also released Friday, and both came in better than expected. Personal Spending increased 1.0% month-over-month in June, while Personal Income increased 0.1% month-over-month.
The biggest winner in today’s earnings was certainly Atlassian (TEAM), which soared 21.9% after beating earnings and revenue projections. Atlassian beat by a wide margin, reporting profits of $0.24 per share against estimates for $0.18 per share. Sales rose 30% year over year while the business software company added 23,300 net new customers, for 36% growth in customer count.
Pinterest (PINS) was likely the biggest loser in earnings today, dipping 19% on the day. Despite year-to-year revenue growth of 125% and an earnings beat, Pinterest nose-dived on declining users. Monthly active users at Pinterest fell 5%, about 20 million users, during the second quarter.
From Fire Sale to Hot Pick
The week started off with sweeping regulation changes in China that spurred a fire sale of Chinese stocks. The Chinese government banned foreign investors and for-profit business models from its education sector, leaving investors in those companies seemingly on a sinking ship.Shares of New Oriental Education & Technology Group (EDU) and TAL Education Group (TAL) fell sharply after announcing the regulatory changes.
However, these stocks fought back hard this week, after firms announced structural changes to their businesses that the companies believe will stave off the regulatory attack. TAL Education Group is said to be planning to offer its after-class courses for free, while creating more self-study resources, according to a Bloomberg report.
Despite starting the week with a crash, TAL Education recovered gaining 43% since Monday to finish the week up 1.17%. Meanwhile, EDU finished down 25.94% for the week.
Slowing Growth
A developing trend in earnings from high-flying Covid picks recently has been slowing growth. Netflix (NFLX) kicked the trend off last week with disappointing subscriber growth, an earnings miss and guidance below Street estimates.This week, Apple (AAPL), Facebook (FB), Amazon (AMZN) and Pinterest (PINS) all offered a similar, gloomy forecast.
Apple reported a blow-out quarter, but shares slipped following after the company warned that growth may slow after the record-setting quarter. Apple said supply constraints would affect iPhone and iPad sales during the current quarter, and that decelerating demand would also help drive a slowdown.
Facebook delivered a similarly impressive quarterly report, but a gloomy outlook dampened the report. The company is already feeling the effects of the iOS change which made users choose between opting in and out of data collection, which, when opted out, makes targeted ads much less targeted. The company expects "increased ad targeting headwinds" during 2021 as users continue to opt-out of data collection.
Finally, Amazon dropped following its earnings. The company beat on earnings, Amazon Web Services had a strong showing, and the company reported year-over-year revenue growth of 27.2%, but that concludes Amazon’s second quarter highlight reel. Amazon missed on revenue estimates for the first time in three years, which is a surprise to say the least given Amazon’s Prime Day was held during this quarter. Worse than missing revenue during your own holiday is that the company issued underwhelming guidance that was on the downside of consensus estimates. Amazon expects a revenue range of $106-$112 billion during the current quarter, which is a bit lower than consensus of $118.7 billion.
All told, stocks edged lower this week. The S&P 500 declined 0.37%, while the Dow fell 0.36%, the Nasdaq lost 1.11%, and the Russell 2000 notched the only advance, with a 0.75% increase.