No matter what walk of life you come from, you’ve witnessed the phenomena of a popular person. Yes, it seems as though anything this person does is without flaw, without failure, and you would kill to fill their shoes. You might even offer to be their official shoe-filler, I’m even entirely sure what that job is, but you get the picture. Now, I’ve always found it curious to reminisce about what happens to a popular when their sheen wears off. When their stranglehold on the social market loosens. Well, in the case of Amazon (AMZN) and Google (GOOG), the populars of the stock market schoolyard, their collective sheen may be wearing off.
Industry See, Investor Do
After a week of seemingly unending market volatility, the market’s major indexes have just about had it. The Dow Jones Industrial Average (DJIA) dropped like a burning hot pocket over 600 points on Wednesday, with the Nasdaq not faring well either as it plunged over 300 points, the index’s worst day since Aug. 18, 2011.
As for the reasoning behind this volatility, investors are shaking in their boots as interest rates rise and debt yields soar to new heights in the wake of President Trump’s trade-war with China. For companies that rely on goods from China, the president’s proposed 10% – 20% tariff on $200 billion worth of Chinese goods will make manufacturing increasingly more costly.
Several surveys conducted by analysts as well as the U.S. Federal Reserve’s Beige Book indicated panic felt across the board in regards to the tariffs, with the worrisome companies unsure of how their financials will look following the incurrence of tariff related costs.
As industry leaders and investors batten down the hatches for a possible bear market, tech giants Amazon (AMZN) and Google (GOOG) are proving that even the brightest among us have dark days.
Oh How The Mighty Have Fallen
Best friends, Amazon, and Google (GOOG), from the FANG group, clearly goofed off in class during this last fiscal quarter, because when they brought home their quarterly earnings reports, their parents gave the “not-mad-just-disappointed speech.”
-Shares of Google parent Alphabet Inc. (GOOG) dropped 3.76%, trading at $1,054.33 per share
– Amazon (AMZN) fell behind in shipping product and dove 8.78% early on Friday, trading at $1,625.61 per share
At the home of the Amazon (AMZN) family, the e-commerce site tried to explain to its parents that while the company’s profit, on a per-share basis, was more than 10 times larger than the prior-year quarter, its revenue stream, as well as its projected holiday season sales, were far below what mom and dad were expecting. Colin Sebastian, a financial analyst for Baird Equity Research, explains that Amazon’s (AMZN) poor holiday forecast may be reflective of an increase in shipping costs as well as CEO Jeff Bezos’ move to up the company’s minimum wage to $15/hr.
Across town, in the suburbs of Mountain View, California, tensions are rising in the home of Googles (GOOG). Touting a third-quarter revenue increase of 22%, Google spoke on improvements made to its search-engine, forays into the smartphone space, and innovative content creation displayed on Youtube, but Wall Street was just not impressed.
Hours prior to Google’s (GOOG) release of their Q3 report, the New York Times published a piece elucidating the fact that the tech giant had tried to cover up its recent layoff of 45 employees accused of workplace sexual harassment. Among these employees were several former Google executives. I can’t imagine this news bringing investors joy or giving them hope for the moral fortitude of the company.
In addition to the swift, sweeping under the rug of Google’s (GOOG) sexual misconduct firing spree, consumers and investors alike are pulling back because of privacy-related concerns. Earlier this year, Facebook (FB) and its chief executive officer Mark Zuckerberg faced public scrutiny for a massive data breach that resulted in millions of user data compromised by hackers. In addition to the Facebook (FB) debacle, Apple (AAPL) was under fire in September because reports suggested Apple’s data centers had been implanted with Chinese microchips, giving the hackers unrestricted access to company information.
Closing Thoughts
Growing criticism of the security of consumer data has led to a market uncertain with how to react. Companies like Google (GOOG) and Amazon (AMZN) are in a bind because, while they are showing healthy performances reflected in their 3Q revenue reports, trade worries surrounding the intractable economic conflict between the U.S. and China, as well as rising interest rates and market sell-offs, is causing even the largest among us to suffer the consequences.
