The prices of tech and growth stocks such as Meta or Paypal move wildly as soon as there are surprises. Investors are subjecting companies’ business models to a radical reality check. Anything that doesn’t make a profit is in bad shape – and vice versa.
Given the uncertainty, good advice is also expensive for traders on the New York Stock Exchange.
The foreseeable end of cheap money is obviously also the end of the “pampering program” for companies with airy business models. In these times, investors want to see hard facts – and anyone who disappoints the high expectations of sales and profit growth will be mercilessly punished on the stock exchanges.
This can be seen in the massive price losses of the “fantasy values” of a certain Cathie Wood in the past few weeks, as well as in the almost incomprehensible price turbulence in the shares of Facebook alias Meta, Paypal or Amazon and Snap in the past few hours.
Meta, Facebook’s parent company, was down more than $230 billion on Wall Street on Thursday, the biggest fall in value of any American company, after disappointing earnings figures for the past year and unconvincing plans for the company in the face of increasing competition future had presented. With Paypal it was not much different.
On the other hand, the price reaction at Google, Amazon and Snap was extremely euphoric: the search engine group was operationally convincing, the internet retailer can obviously make up for disappointing sales figures with price increases for Amazon Prime membership fees – and Snap’s shares rose by more than 60 percent in after-hours trading , because the company had reported its first profit ever.
In view of the sales and profit figures presented so far, most market observers make a solid development on average. However, much more than in the past, the response will depend on what company executives have to say about their expectations for the coming months amid higher interest rates and the ongoing Covid-19 pandemic. “Not many of them paint a rosy picture because of the uncertainty,” it says. Experts warn that any indication of a slowdown in growth is likely to result in further sharp price fluctuations.
Indeed, on Wall Street on Thursday, the Dow Jones Industrial benchmarks fell a good 500 points, or 1.45 percent, of their value, while the broader S&P 500 index was down 2.44 percent. Nasdaq Composite tech stocks slipped a whopping 3.74, resuming the year-to-date sell-off after staging a brief bounce in the previous four days.