As stocks fall, economic fears rise, alongside inflation
Broadly speaking, earnings reports showed continued earnings growth, and results from some big companies, like Microsoft and Facebook parent Meta Platforms, briefly eased the panic on Wall Street. About 80% of S&P 500 companies that reported results through Thursday did better than analysts expected, according to FactSet data.
But other companies have only added to the downdraft. Netflix plunged after saying last week that it expected to lose subscribers – 200,000 in the first three months of the year and another two million in the current quarter. The stock fell more than 49% for the month.
Amazon fell 14.1% on Friday after reporting its first quarterly loss since 2015, citing rising fuel and labor costs and warning that sales would slow. Its shares fell 23.8% in April.
General Electric warned on Tuesday that the economic fallout from Russia’s invasion of Ukraine would weigh on its bottom line. Its shares fell 10% that day and about 18.5% for the month.
The war, which began in February, has posed a new risk to the fragile global supply chain: Western sanctions against Russia, including a ban on the country’s oil imports by the United States, and European promises to limit purchases of Russian oil and gas.
Now executives are also weighing how Covid-19 lockdowns in China, which has the world’s second-largest economy, could affect profit margins. Several Chinese cities are closed, and although factories remain open, the country’s draconian “zero Covid” policy has led to disruptions in shipments and delays in delivery times.
Texas Instruments Inc. and machine builder caterpillar warned investors this week that the shutdowns in China were affecting the company’s manufacturing operations. On Thursday, Apple also warned that the outbreak there will hamper demand and production of iPhones and other products. Shares of the company fell 3.7% on Friday and ended April with a loss of 9.7%.
The outlook for the economy, the effects of the Ukraine invasion, lockdowns in China and how quickly the Fed will raise interest rates are still unclear. Markets will likely remain volatile until they are.
“There are certainly a lot of open and unquantified risks looming,” said Victoria Greene, chief investment officer at G Squared Private Wealth, an advisory firm. “The American economy lives and dies for the consumer, and as soon as that consumer starts to slow down, I think it will hit the economy hard.”