PayPal's 25% Plummet Pares Nasdaq Gains; S&P Moves Higher

U.S. stocks' rally that began late last month and appeared to accelerate this morning has stalled, with the major averages moving between small gains and losses in the midday session.

Shares of PayPal Holdings (PYPL) are down 26% as investors react to the company's weak earnings report.

Key Takeaways

  • Stocks pared gains, with the Nasdaq briefly dipping into negative territory due in part to PayPal Inc. shares plummeting.
  • PayPal shares are down 26% as of Wednesday afternoon.
  • Tech stocks were initially powered by Google parent Alphabet inc., whose shares rose after it reported strong quarterly earnings and announced a 20-for-1 stock split.
  • Oil futures are little changed, giving up ground after spiking on reports the U.S. will send 3,000 troops to Germany, Poland, and Romania amid Russia-Ukraine troubles.

The Nasdaq, which had closed higher in each session last week, was this morning on its way to a sixth-straight daily increase before giving up ground. It's now only marginally higher, thanks in part to PayPal shares plummeting.

Tech stocks were initially powered by Google parent Alphabet inc. (GOOG), whose shares rose after it reported strong quarterly earnings and announced a 20-for-1 stock split. Semiconductor companies are among the best-performing stocks in the S&P 500, lifted by Advanced Micro Devices Inc. (AMD), which also had better-than-expected earnings and boosted its guidance. 

Shares of PayPal are sinking following its earnings news. General Motors Corp. (GM) shares are falling on its quarterly results. Exelon Corp. (EXC), a top nuclear shares are plunging after it announced completion of its separation from Constellation Energy.

Oil futures are little changed, giving up ground after spiking on reports the U.S. will send 3,000 troops to Germany, Poland and Romania amid Russia-Ukraine troubles. The 10-year Treasury note is down to 1.75%. The dollar is losing ground to other major currencies. 

Cryptocurrencies are trading lower, with the price of Bitcoin and Ethereum both declining by around 4%. 

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Employment Exit: Chart of the Day

The impact of the spread of the omicron variant of COVID-19 led to a surprising decline in private sector jobs last month.

Payroll provider ADP reported the economy lost 301,000 private sector positions in January, the first month of job losses since December 2020. Economists had anticipated a gain of more than 200,000.

The bulk of the declines were in the services sector, with half of the losses in the leisure and hospitality industry. Large job declines also occurred in trade, transportation and utilities, and education and health services. Manufacturing jobs fell by 21,000, while construction jobs were down 10,000. 

ADP found the only industries in its survey that had employment gains were professional and technical services, natural resources and mining, and franchises.

ADP Change in Nonfarm Private Employment Jan. 2022
ADP Change in Nonfarm Private Employment Jan. 2022.

Omicron Effect

ADP Chief Economist Nela Richardson said the labor market recovery “took a step back” to start the year because of omicron, but added the effect is likely temporary. 

The White House warned the public on Monday that jobs numbers from the Bureau of Labor Statistics (BLS) report, due Friday morning, may appear bleak, as the survey took place during the omicron variant's peak in January.

Economists expecting an increase of 150,000 in nonfarm payroll last month.

PayPal Holdings (PYPL): Stock of the Day

Shares of PayPal Holdings are plunging after the payment services provider reported current quarter profit and full year sales guidance that came in below forecasts, and said it will miss its target for user growth. The stock lost more than 26% of its value as of this afternoon.

PayPal indicated first quarter earnings will be $0.87 per share, 25% less than analysts’ estimates, and 2022 revenue will increase 15% to 17%, also short of expectations. 

The company added it has given up its goal of having 750 million users by 2025, and will instead focus on driving average revenue per user. It anticipates increasing its user base by 15 to 20 million this year, less than half of what analysts had been looking for. 

Mixed Quarterly Results

For the fourth quarter, PayPal announced earnings of $1.11 per share, missing forecasts, while revenue was better than expected, rising 13% to $6.92 billion. 

PayPal Holdings shares have lost a quarter of their value today, and they’re trading at their lowest level since May 2020. 

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