2 reasons Amazon stock is slumping today

Inflation fears and recent quarterly results from its peers are driving the stock lower.

| More on:
amazon prime truck on a road

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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.

More on International Stock News

a girl stands in an apple orchard holding two red apples in raised arms with a happy, celebratory look on her face with a large smile and a pretty country background to the picture.
International Stock News

1 emerging catalyst that Apple investors may have missed

Apple's sales nearly doubled in this potentially lucrative market.

Read more »

blue tesla
International Stock News

Investors should wait for these 2 signals before buying Tesla

Tesla's stock price might have fallen, but buying today does not guarantee good returns to investors.

Read more »

woman delivering Amazon Prime parcel
International Stock News

Why the Amazon share price rose today

Positive inflation news bodes well for the e-commerce leader.

Read more »

man happy while driving tesla
International Stock News

Why today’s jump in Tesla shares surprised investors

Musk may be selling shares, but investors aren't reading too much into it.

Read more »

Green arrow with green stock prices symbolising a rising share price.
International Stock News

Why Bitcoin and Ethereum are rising today

New data hinted that inflation may have peaked in July.

Read more »

Purple tech growth chart
International Stock News

Nasdaq surges after inflation data: Why the top tech and growth stocks moved higher

Although inflation is still above 8%, investors are starting to come back to growth stocks. There will be a lot…

Read more »

A man wearing a blue jumper and a hat looks at his laptop with a distressed and fearful look on his face as he reads about the Core Lithium share price falling 30% in a month
International Stock News

Elon Musk just sold US$7 billion worth of Tesla shares. What’s going on?

The enigmatic CEO offloaded shares in his high-profile company. What gives?

Read more »

Downward spike graph
International Stock News

Why Bitcoin, Ethereum, and Shiba Inu are falling today

Cryptocurrencies fell along with tech stocks as investors await key inflation data.

Read more »