Wall St’s relief rally set to fade on Snap shock, growth fears

U.S. stock indexes were set to fall on Tuesday following a strong relief rally in the previous session as weak forecasts from firms including Snapchat owner Snap Inc (NYSE:SNAP) added to nerves about an inflation-struck economy.

Snap Inc plummeted 33% in premarket trading, dragging down several social media and internet stocks, after the company slashed its second-quarter earnings forecast and said the economy had worsened faster than expected in the last month.

Twitter Inc (NYSE:TWTR), Google-owner Alphabet (NASDAQ:GOOGL) Inc, Meta Platforms Inc and Pinterest (NYSE:PINS) Inc, which rely heavily on advertising revenue, fell between 3.7% and 16.0%.

Abercrombie & Fitch Co slumped 29.7% after the apparel retailer trimmed its full-year sales outlook, also citing inflation.

“The back half of the earnings season has seen major disappointments … That continues to weigh on the market across sectors,” said Dennis Dick, trader at Bright Trading LLC in Las Vegas.

“Expectations are a lot lower, but these companies seem to be finding a way to even get under the lower bar.”

The broad selloff snapped Monday’s rally as Wall Street tried to recover from a steep selloff last week that saw both the S&P 500 and the Nasdaq mark their longest streak of weekly declines since the dotcom bust in 2001.

“Yesterday’s rally and Friday’s market action suggested that it has hit a near-term bottom, but there’s still a lot of negative sentiment,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Flash readings on S&P Global (NYSE:SPGI) manufacturing and services PMI data at 0945 am ET will offer another glimpse into how the world’s largest economy fared in May.

Federal Reserve Chair Jerome Powell is scheduled to speak later in the day, with investors looking for any fresh comments about the path of future interest rate hikes.

Markets are pricing in 50 basis point rate hikes by the Fed in June and July.

At 08:37 a.m. ET, Dow e-minis were down 188 points, or 0.59%, S&P 500 e-minis were down 40 points, or 1.01%, and Nasdaq 100 e-minis were down 197.75 points, or 1.64%.

Zoom Video Communications (NASDAQ:ZM) Inc jumped 4.8% after raising its full-year profit outlook on strong enterprise demand.

The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 29.39 points.