2 reasons Amazon stock is slumping today

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened 

Shares of the e-commerce juggernaut Amazon (NASDAQ: AMZN) were falling today as investors processed the disappointing quarterly financial results recently reported from two of Amazon’s peers. 

Additionally, Amazon’s stock was tumbling today as investors continued to worry about rising inflation and how the Federal Reserve’s action in response to it could slow down the economy. Those fears sent the tech-heavy Nasdaq Composite down 2.7% this morning. 

As of 11:39 a.m. ET, Amazon’s stock had fallen 5.4%. 

So what

Earlier this week, Walmart (NYSE: WMT) missed analysts’ earnings expectation for its first quarter, which has sent its share price falling over the past few days. Then yesterday, Target (NYSE: TGT) reported adjusted earnings of $2.19, which was far below Wall Street’s average estimate of $3.07 for the quarter. That sent Target’s stock into a free-fall this morning, plunging 24%. 

The worse-than-expected performance by two of Amazon’s retail rivals is weighing down Amazon’s stock today as investors worry that the same supply chain constraints and effects from rising inflation will hurt the online retailer as well. 

This leads us to the next reason why Amazon’s stock is stumbling today: Investors are getting increasingly anxious about the economy. 

Inflation is still at a nearly 40-year high, and the Federal Reserve has committed itself to raising the federal funds rate to get it back down. That’s going to take some time and will likely result in some aggressive rate hikes in the coming months. 

Even with those moves, Fed Chairman Jerome Powell said recently that he couldn’t guarantee a so-called soft landing for the economy.  

That’s stoked fears among some investors that the Fed’s moves could result in a recession, and it’s causing some investors to sell their stocks, leading to a broader market drop.

Now what 

It’s not surprising that Amazon investors were nervous this morning. Two big U.S. retailers are experiencing the effects of inflation, long-standing supply chain problems, and rising fuel costs, which are all taking a bite out of profits. 

And with the Fed taking big steps to tamp down inflation, some investors are exiting their stock positions and looking for safer places to put their money. 

But as difficult as this time is, investors should remember to keep playing the long game, particularly with companies like Amazon, which have significant competitive advantages and are in a strong financial position to weather any potential economic storm. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 reasons Amazon stock is slumping today appeared first on The Motley Fool Australia.

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Chris Neiger has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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