Shares of Amazon.com, Inc. [NASDAQ:AMZN] took a hit in last night’s trading, sliding by over 6% during the day of Wall Street’s worst performance in eight months.
This seemed a common theme in growth stocks like Amazon. Apple, Netflix, Tiffany & Co all fell as well.
The US share market was slapped overnight, in the biggest sell off since February. No market was free from its impacts.
ASX futures are trading substantially lower, down 1.6%, meaning heavy selling in global markets will most likely extend into the Australian share market.
Amazon’s stock behind last year’s third-quarter result
Barclays Analysts have forecasted that Amazon’s stock value could continue to fall after its third-quarter results, which are expected be announced on October 25.
Analysts Ross Sandler commented on the performance:
‘With the online stores revenue likely dropping below 10% year-over-year excluding FX for the first time in 3Q (on a four-point tougher comp), and given that line is half of retail revenue, we think investors may react negatively.’
Amazon shares have fallen 11.2% since closing at its record high of 2,039.15 on 4 September.
The viscousness of this drop seen in Amazon and share markets at large is most likely is due to the fact that long-term interest yields for Treasury bonds have reached their highest levels since 2011. This has resulted in a drastic drop in the risk-taking inclination for the stock market.
Ed Campbell, senior portfolio manager at QMA, the asset management branch of Prudential Financial told the ABC:
‘It’s a bit of a bloodbath today, clear risk-off action with few places to hide.’
On the back of this trend, unemployment in the US has hit a 50-year low. Combine this with anticipation of a spike in US short-term interest rates as rate hikes are expected numerous times over the next few months.
‘It’s primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies,’ Campbell said.
‘Markets are starting to contemplate that this could be a Fed [Federal Reserve] that’s over-zealous in terms of interest rate hikes,’ he added.
Amazon stocks set to continue to decline
No surprise here that the Amazon stock is expected to continue its decline. But the question is how long and how badly this will affect its value.
This decline could continue to ride off of the US volatility. But as always we will have to let the next couple of months roll out to be sure, as political uncertainty is often tied to share market strength and weakness.
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PS: Australia is a small country, sensitive to big movers and shakers like the US and China. At times of such volatility in economic futures and political uncertainty, economic expert Vern Gowdie details why Australia could be heading for a recession, in his free report ‘Aussie Recession Survival Guide’ (download now).