TheNasdaq Composite Index (^IXIC -0.96%) is down almost 238 points, or 2%, as of 1:18 p.m. ET on July 22, as earnings season ramps up. One of today's biggest losers is social media behemoth Meta Platforms(META -1.57%), down 7.8%. Joining it in the sell-off are Intuitive Surgical(ISRG 3.12%) andSVB Financial(SIVB.Q -54.55%), after reporting quarterly results that fell short of expectations. Those two are down 5.5% and 16.7%, respectively, as of this writing.
Social media stocks report declining ad revenues, rattle recession-fearing investors
Meta Platforms, the company behind two of the world's biggest social media platforms in Instagram and Facebook, is seeing its shares fall today after two of its peers, Twitterand Snap, reported second-quarter results that paint a worrisome picture. Snap's revenue increased year over year, but fell from the first quarter, while Twitter saw revenue fall from last year and last quarter.
Investors now are expecting to see similar struggles from Meta. The company is coming off a rough couple of quarters -- at least by its incredibly high prior standard -- and barring a surprise, is unlikely to return to revenue and profit growth in the face of ad buyers pulling back from spending as consumers deal with the pressure of rising interest rates and four-decade-high levels of inflation.
Earnings misses send Intuitive Surgical, SVB Financial shares sharply lower
Shares of robotic surgery giant Intuitive Surgical are down more than 5% today, a relatively strong recovery from the open, when they were down by double-digits. The company reported second-quarter results after market close yesterday, with 14% growth in procedures (it makes money selling consumables for its da Vinci system), but a 15% decline in the number of new da Vinci systems sold in the quarter resulted in "only" 4% revenue growth. Both GAAP and adjusted earnings per share declined from last year. After the market's initial big negative reaction, Intuitive shares have regained some of their losses, as investors see the longer-term opportunity, as represented by continued double-digit procedures growth.
SVB Financial, the parent of Silicon Valley Bank, reported second-quarter earnings of $5.60 per share after market close yesterday, well below the $7.68 per share investors expected. Fee-based income also fell sharply in the quarter, as the company's private equity and venture capital businesses continued to report weak results. But the biggest reason for the earnings "miss" was credit losses the bank took in the quarter, as it -- along with most large banks -- prepared for potential defaults from borrowers if we do see a recession in coming quarters. As much as the results themselves, today's big decline is likely the product of messaging. Management has been very optimistic in prior quarters, with the lowering of full-year guidance coming barely three months after raising when it reported first-quarter results.
The common thread is recession and economic fears, but the future remains bright
Earnings season is always volatile. When you add in some of the highest inflation in living memory for many, and a sharp increase in interest rates, you have a perfect recipe for fear-driven volatility. And that's likely to remain the case for the weeks to come as more and more companies report. And let's be honest -- many of those companies willreport even worse numbers than we have seen so far, falling well short of expectations, cutting guidance, and maybe raising the veil on whether a recession is coming even more.
But when we lookbeyondtoday's numbers, or even the rest of this quarter and this year, investors should take heart. Stocks are indeed risky and volatile (that's where the risk comes from) in days, weeks, and months. But when you stretch that time horizon out to years, the power of diversified ownership of great businesses pays off. If you're working with capital you'll need to pay for your life in the weeks, months, or even next couple of years, stocks might not be the right thing to own.
But when it's deployed to meet financial goals that are multiple years into the future, the sell-offs of some of these companies, like SVB Financial and Intuitive Surgical in particular, look like great opportunities for buyers.
SVB Financial provides credit and banking services to The Motley Fool. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jason Hall has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Intuitive Surgical, Meta Platforms, Inc., SVB Financial Group, and Twitter. The Motley Fool has a disclosure policy.
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Why do stocks go down during recession? ›
During a recession, you can expect stock prices to fall across the board. This happens for a number of reasons. For one, as we mentioned before, consumer confidence plummets during economic downturns. People are less likely to spend money – which means businesses make less profit.
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Buying stocks when the overall market is down can be a smart strategy if you buy the right stocks. You could pick up some blue-chip winners that will perform well in the long run. Weaker stocks that rode the market higher are better avoided. The same rule applies to selling when the overall market is down.
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What stocks do worst in a recession? ›
Equity Sectors
On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.
Should I leave my money in the stock market during a recession? ›
You may think you're buying at a low, only to see your portfolio value decline a few days later. The best way to avoid losses in a recession -- and come out ahead -- is to take a long-term approach to investing. Plan on leaving your money alone for at least seven years.
Where is the safest place to put your money during a recession? ›
Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.
Should I pull my money out of the stock market? ›
Key Takeaways. While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.
If you have achieved or are nearing your financial goal
If a market correction occurs, you may not have sufficient time to recover any gains. To safeguard your profits, an early exit may be prudent. Consider reallocating your proceeds to secure avenues such as liquid funds or fixed deposits.
Should I sell my stock if it keeps going down? ›
Winning stocks increase in price for a reason, and they also tend to keep winning. Don't sell a stock just because its price decreased. Every investor wants to buy low and sell high. Selling a stock just because its price fell is literally doing the exact opposite.
What is the stock market going to do in 2024? ›
The S&P 500 generated an impressive 26.29% total return in 2023, rebounding from an 18.11% setback in 2022. Heading into 2024, investors are optimistic the same macroeconomic tailwinds that fueled the stock market's 2023 rally will propel the S&P 500 to new all-time highs in 2024.
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History says the S&P 500 will rise in 2024, and continue moving higher into 2028. The S&P 500 has barreled through 10 bull markets (excluding the current one) since it was created in 1957. Those events have generally been defined by sustained upward momentum across the index.
What month do stocks drop the most? ›
The September Effect is the supposed market anomaly whereby stocks turn negative in the month of September. While it is true that September has been the worst-performing and most-frequently negative month over the past century, the time period under consideration matters a lot.
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- Nvidia Stock.
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What are the 10 best stocks to buy right now? ›
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| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| ServiceNow (NOW) | 1.49 | Strong Buy |
| Assurant (AIZ) | 1.50 | Strong Buy |
| Howmet Aerospace (HWM) | 1.50 | Strong Buy |
| Insulet (PODD) | 1.50 | Strong Buy |
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