Twitter, Tech Stocks Drag Market Down As Shares Close Out Rocky Week; 3Q Reports, Renewed COVID Jitters A Part

Tech stocks drove the market lower Friday as investors worked through an earnings avalanche from five of the world’s biggest companies and mostly didn’t love what they saw.

Twitter is taking the biggest hit, down nearly 20% midday after its daily active user numbers disappointed for the three months ended in September following several consecutive quarters of growth. In earnings reported Thursday afternoon, The Jack Dorsey-led company also cautioned on costs and noted that it’s hard to predict how advertisers might react with the U.S. presidential election looming next Tuesday.

Facebook, Apple and Amazon are trading lower too, down 5%-6%.

Google parent Alphabet is the lone bright spot in the group, up about 4% on a solid recovery in search and advertising, including impressive growth at YouTube. A pending DOJ antitrust investigation is getting shrugged off.

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Facebook blew away ad sales (up 22% year-on-year) but reported users declining slightly in North America in the third quarter from the second. CEO Mark Zuckerberg had warned months ago that the social media giant could see engagement moderate as the pandemic receded.

The DJIA was down 360 points, or 1.36%. The S&P 500 and the tech-heavy Nasdaq were lower, respectively, by 1.41% and a hefty 2.48%.

“In a nutshell, last night expectations from the Street and the overall market was hoping for blow-out results from FAANG tech stalwarts, with Apple and Amazon leading the way, and ultimately came away disappointed, with tech stocks selling off this morning on the news,” said analyst Dan Ives of Wedbush Securities in a note Friday. But he and others found the numbers pretty solid overall and the market reaction overdone — particularly in Apple’s case, Ives said.

The tech giant is getting punished for soft iPhone sales, which declined year-over- year. Ives attributed that to a delayed launch of the newest iPhone –  the iPhone 12 — which hit four-to-six weeks later than usual this year. Customers hit a pause on buying as they waited for that, he said, but noted that pre-order activity is tracking more than twice that of the iPhone 11 a year ago “and should translate into a massive holiday quarter.”

On Twitter, Oppenheimer analyst Jason Helfstein said Friday, “We would take advantage of the pullback in TWTR to add to positions.” He raised his price target on the stock to $55 from $46 and reiterated an “outperform” rating. The shares are changing hands today at around $41.

At Amazon, there seemed to be concerns over COVID-19 related costs and a lack of clarity around key upcoming holiday sales.

The tech selloff Friday even dragged in Netflix despite news of a price hike yesterday that Wall Street applauded. It is also a FAANG stock (Facebook, Apple, Amazon, Netflix and Google) and is down 5%.

These stocks are investor favorites, have seen sharp runups this year and tent to get pummeled as a group when investors are cranky. Perhaps all five shouldn’t report earning within the same half hour on the same afternoon next quarter.

Friday is closing out a very rocky week for stocks — the rockiest in some time — amid rising anxiety across global markets about a spike in COVID-19 infections. Shutdowns have been re-imposed in major European countries Germany, Italy and France. Daily COVID cases in the U.S. reached a record high on Thursday with experts warning that death rates could triple by mid-January.

There were 88,521 new cases of the coronavirus reported in the U.S. on Thursday, according to data from Johns Hopkins University reported by CNN — 9,540 more cases than Wednesday.

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