Poor US corporate reports fuel recession fears

Oct 25 (Reuters) – U.S. companies from tech giants Alphabet (GOOGL.O) and Microsoft (MSFT.O) to GE (GE.N) and toymaker Mattel (MAT.O) reported big hits on Tuesday. slowdowns in growth or warned that things were going to get worse, stoking recession fears and driving stocks lower.

The rash of disappointing results points to a host of problems plaguing the US economy. A strong dollar hurt big business profits overseas, while soaring inflation prompted interest rates to rise and businesses to raise product prices, even as consumers were forced to reduce their expenses.

U.S. consumer confidence declined in October, data showed on Tuesday, after two consecutive monthly increases amid heightened inflation concerns and worries about a possible recession next year.

After years of meteoric growth, Microsoft posted its weakest sales increase in five years and Google’s parent company Alphabet rose just 6% last quarter at its slowest pace since September 2013, at except for a slight quarterly decline in 2020.

Google, which many expected to be more resilient given its status as the world’s largest digital advertising platform by market share, shocked the market with lower-than-expected ad revenue as customers insurance, mortgage and cryptocurrency industries have tightened their advertising budgets. .

“Despite being considered one of the most isolated companies in the advertising space relative to its peers, Google’s poor quarter is the latest sign that deteriorating fundamentals and a challenging macro environment are prompting advertisers to reduce their expenses,” said Jesse Cohen, senior analyst. on Investing.com.

Google’s results bode ill for Facebook’s parent company Meta Platforms (META.O), which relies heavily on advertising and reports results on Wednesday. Last week, its smaller rival Snap Inc (SNAP.N) forecast no revenue growth for the holiday quarter, setting off alarm bells in the social media industry.

Alphabet said it plans to cut its hiring by more than half.

The GE conglomerate, which is in the process of splitting into three companies, said it would cut the global workforce of its onshore wind unit by a fifth, which is battling rising raw material costs due to the inflation and supply chain pressures.

Alphabet shares fell 7% in trading after the bell. Microsoft fell 2% and chipmaker Texas Instruments, which forecast quarterly revenue and profit below estimates, fell 5%. Shares of Spotify (SPOT.N), which also warned of slow advertising growth, fell 4%. Meta shares fell 4%.

A lack of demand for personal computers and laptops was evident in Microsoft’s last quarter, as its Windows business fell 15%, a sharp turnaround after months of pandemic-fueled sales thanks to people working and studying. home.

Texas Instruments (TI) echoed that sentiment, confirming similar predictions from fellow chipmakers Samsung Electronics Co Ltd (005930.KS) and Advanced Micro Devices Inc (AMD.O) earlier this month.

“During the quarter, we saw expected weakness in personal electronics and growing weakness in the industry,” said TI boss Rich Templeton. The company, like other chipmakers, is dealing with gadget makers cutting orders to eliminate chip inventory after the pandemic-driven surge in demand quickly turned into a free fall in just a few weeks.

Weak demand for consumer electronics was also flagged by Apple iPhone maker (AAPL.O) Foxconn (2317.TW) as China’s economy slowed significantly on COVID-19-related drags.

Mattel, which is highly sensitive to discretionary spending cuts, lowered its profit forecast for the year and said it would increase promotions ahead of the busy holiday season to encourage shoppers hit by inflation. to buy his Barbie dolls.

Earlier on Tuesday, post-it note maker 3M Co said it expected weak consumer spending to continue into the upcoming holiday season and cut its full-year forecast.

Still, there were positives in the report cards.

Chipotle Mexican Grill Inc reported quarterly sales and profits that topped the street as wealthier customers ate their burritos despite higher prices, even though lower-income consumers ate there less often.

Coca-Cola Co (KO.N), a favorite in a downturn, joined rival PepsiCo Inc (PEP.O) in raising its annual forecast as customers bought their sugary sodas despite several rounds of price hikes.

Reporting by Chavi Mehta, Tiyashi Datta, Eva Mathews, Uday Sampath Kumar, Granth Vanaik, Deborah Mary Sophia, Aditya Soni, Mehr Bedi, Kannaki Deka and Abhijith Ganapavaramin in Bengaluru, Jane Lanhee Lee in Oakland, Sheila Dang in Dallas, Hilary Russ in New York and Rajesh Kumar Singh in Chicago; Written by Sayantani Ghosh; Editing by Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

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