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Snap warning to derail US stock market

by LLB Reporter
24th May 22 12:21 pm

Snap, crackle, pop, watch as shares drop in companies reliant on advertising income. A warning by Snapchat’s owner has sent ripples across the market for social media companies, triggering fears that advertising spend has peaked for now.

Russ Mould, investment director at AJ Bell, said: “We’ve already seen cracks in this market when Alphabet last month reported weaker than expected advertising revenue for YouTube.

“With Snap following suit, it’s understandable why investors are fearful. Advertising spend typically tracks economic activity. When times are good, companies are confident to spend heavily to promote their products and services. When the outlook is gloomier, advertising spend is pared back. After all, why splash the cash on promotions if fewer people are going to open their wallets?

“Snap’s shares fell 31% in after-hours trading, with Pinterest down nearly 12%, Meta Platforms falling 7% and Alphabet down nearly 4%. These movements will inevitably see the US markets have a bad day when trading kicks off later today. That in turn will put investors in a bad mood and create more storm clouds just at the point when many were hoping the market slump was close to bottoming out.”

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