Economy

Stocksak: Fears of recession are fuelled by U.S. companies with poor report cards

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© Stocksak. FILE PHOTO. The logo for Google LLC can been seen at the Google Store Chelsea in Manhattan. New York City. New York, U.S.A, November 17, 2021. REUTERS/Andrew Kelly/File photo

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By Eva Mathews. Chavi Mehta. Jane Lanhee Lee

(Stocksak), – U.S. tech giants Alphabet, Microsoft (NASDAQ;) to GE and Mattel (NASDAQ 🙂 reported on Tuesday big slowdowns in their growth or warned they would get worse, fueling recession fears.

A host of problems are plaguing America’s economy, as evidenced by the rash of disappointing results. The strong dollar has hurt overseas profits of large companies, while high inflation has caused interest rate hikes and companies that raise product prices to increase their profits, while consumers have had to cut back on spending.

Data showed Tuesday that U.S. consumer confidence declined in October after two consecutive monthly increases. This was despite heightened inflation fears and concerns about a possible recession next January.

After years of turbo-charged growth Microsoft recorded its slowest growth in sales in five decades. Google parent Alphabet, which was founded in September 2013, saw a 6% increase in sales last quarter. There was no quarterly decline in 2020.

Google, which many had expected to be more resilient because of its status as the world’s largest digital advertising platform by market share, shocked the market with weaker-than-estimated advertising revenue as customers in the insurance, mortgages and cryptocurrencies industries tightened their ad budgets.

“Despite being regarded as one of the most insulated companies within the advertising space relative to peers,” stated Jesse Cohen, senior analyst at Investing.com.

Google’s results are bad news for Facebook (NASDAQ:), parent Meta Platforms. This company is heavily dependent on advertising and reports results on Wednesday. Last week, its smaller rival Snap Inc (NYSE:) predicted no revenue growth for holiday quarter, setting off alarm bells in social media industry.

Alphabet announced that it intends to reduce its workforce by more than half.

Conglomerate GE said it is in the process separating into three companies. The company will reduce global headcount by a tenth at its offshore wind unit. The unit has been struggling to cope with rising raw material costs and supply-chain pressures.

In trading after the bell, Alphabet shares plunged 7%. Microsoft shares fell 2%, while chipmaker Texas Instruments (NASDAQ;), which predicted quarterly revenue and profit below estimates was down 5%. Spotify shares (NYSE:), which warned about slow advertising growth, fell 4%. Meta shares fell 4%.

Microsoft’s past quarter saw a lack of demand for laptops and personal computers. This was a sharp turnaround after months and months of pandemic-fueled sales.

Texas Instruments (TI) echoed this sentiment, supporting similar predictions by fellow chipmakers Samsung Electronics Co Ltd and Advanced Micro Devices Inc (NASDAQ:) Inc earlier in the month.

Rich Templeton, TI boss said that “we experienced expected weakness and growing weakness across all industries during the quarter.” The company, like other chipmakers, has to deal with gadget makers cutting orders in order to clear stockpiles.

Apple (NASDAQ:), Foxconn, an iPhone assembler, has also flagged a weak demand for consumer electronics as China’s economy has slowed significantly due to COVID-19-related curbs.

Mattel, which is susceptible to discretionary spending cuts in the future, has reduced its profit forecast for the year. It also stated that it would increase promotions going into the busy holiday period to encourage inflation-hit customers to purchase its Barbie dolls.

3M Co, a post-it manufacturer, stated that it expects weak consumer spending to continue into next holiday season and reduced its full-year forecasts.

There were still some bright spots in the report cards.

Chipotle Mexican Grill Inc (NYSE: ) reported quarterly sales and profits which topped the Street because wealthy customers ate burritos despite higher prices, even though lower-income people ate there less often.

Coca-Cola (NYSE) Co was a favorite in a slowdown and joined PepsiCo, (NASDAQ:) Inc, in raising its annual forecasts. Customers purchased their sugary sodas despite multiple price hikes.

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Stocksak Editorial

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