Why the Amazon share price slumped on Tuesday

The evidence of a weakening economy continues to grow.

| More on:
sad child holds paper and leans with head in hand near a computer looking downcast.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

A broad cross section of stocks stumbled on Tuesday, as market watchers focused on deteriorating macroeconomic conditions and the potential that things could get worse before they get better.

E-commerce platform Amazon (NASDAQ: AMZN) stock was down as much as 2.3% on Tuesday morning, mobile games platform Skillz (NYSE: SKLZ) slipped as much as 5.1% and online used car retailer Carvana (NYSE: CVNA) was off by as much as 6.7%. As of 2:34 p.m. ET, the trio were still trading lower, down 1.5%, 2.9%, and 3%, respectively. These stocks followed the broader market lower, as the S&P 500 gave up 1.2%, while the Nasdaq Composite declined more than 1.4%.

There was very little in the way of company-specific news behind the sell-off, but fears regarding the faltering economy intensified as investors weighed the possibility that they could be facing higher inflation and the potential for a prolonged recession.

So what

A report released Tuesday by the Bureau of Labor Statistics added to the growing mountain of evidence that the economy could be worse off than originally expected. The Job Openings and Labor Turnover Summary for July found that there were almost 1 million more job openings than market watchers expected. The total number of available positions rose to 11.24 million, far exceeding the 10.3 million predicted.

Economists have been keeping a close eye on the growing shortage of candidates to fill the available positions, a situation that seems to be getting worse instead of better. There are now nearly two jobs openings for each available candidate. As a result, prospective employers are forced to offer higher wages in order to entice potential employees, which in turn increases inflationary pressures.

In another sign of the tightening job market, the number of job openings increased in July compared to June, with an additional 200,000 positions going unfilled.

The news come on the heels of remarks by Federal Reserve Bank chair Jerome Powell late last week that suggested the Fed would continue its aggressive campaign to combat inflation. "While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," Powell said. "These are the unfortunate costs of reducing inflation."

The Fed has been working to reduce the number of unfilled positions without sparking higher unemployment. Unfortunately, the red-hot job market increases the likelihood that the central bank will be forced into another 0.75% rate increase when policymakers meet again in September, which would mark the third successive rate hike of this magnitude in four months.

Now what

So what does this all have to do with this trio of companies? The continuing prospect of an economic slowdown will weigh on a great many consumer discretionary stocks.

The potential for even higher interest rates will likely result in "pain" for consumers, according to Powell. Indeed, the average household is already making difficult decisions caused by higher costs for food and fuel. If the faltering economy further reduces consumer spending, it's conceivable that consumers will cut back on e-commerce purchases, forgo the purchase of a new car, or refuse to lay out hard-earned cash for competitive games of chance.

That said, for investors who are already sold on the prospects of Amazon, Carvana, and Skillz, the economic headwinds will eventually abate. That gives investors the opportunity to use temporary price slumps like these as an opportunity to get shares at a discount.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Should you invest $1,000 in Netwealth Group Limited right now?

Before you buy Netwealth Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Netwealth Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Amazon and Carvana Co. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Skillz Inc. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A man looking at his laptop and thinking.
International Stock News

Amazon: A good quarter but some concerns

Here's our initial take on Amazon's financial report.

Read more »

Man looks up at apple on his head.
International Stock News

Apple: Growth in a difficult environment

Here's our initial take on Apple's financial report.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Why Microsoft stock popped this week

Microsoft stock was up by 9.5% this week.

Read more »

Electric vehicle such as Tesla being charged at charging station.
International Stock News

Tesla searches for Musk successor: Why this matters

Could Elon get the chainsaw from his own board?

Read more »

customers inside and outside a Microsoft retail store
International Stock News

Microsoft shares earnings report: What's the verdict?

Investors moved the Microsoft share price significantly.

Read more »

Warren Buffett
International Stock News

Countdown to Berkshire's AGM: What do investors expect to hear from Warren Buffett this year?

All eyes will be on Omaha, Nebraska this weekend.

Read more »

A smiling woman holds a Facebook like sign above her head.
International Stock News

Meta surges on blockbuster earnings report

It's a good day to be a Meta investor.

Read more »

A family sits on their couch, eyes glued to the television.
International Stock News

Can Netflix be a $1 trillion company by 2030?

How much more can it grow its subscription base?

Read more »