Stock Market Today: Stocks Drop Ahead of CPI, WeWork Tanks on Bankruptcy Concerns
The major indexes closed lower for a second straight day amid a batch of disappointing earnings reports.
Stocks closed lower again Wednesday as investors took in the latest round of corporate earnings reports and looked ahead to tomorrow's key inflation update. Another day of notable losses for several tech- and tech-adjacent stocks didn't help matters, with the Nasdaq Composite extending its outsized August decline.
With little in the way of economic news, investors turned their attention to a fresh batch of earnings reports – most of which were disappointing. Roblox (RBLX), for instance, plunged 21.9% after the gaming company reported a second-quarter loss of 46 cents per share vs its year-ago loss of 30 cents per share. Revenue was up 15.2% year-over-year to a higher-than-expected $680.1 million, while bookings rose 22% to $780.7 million, below what analysts were anticipating.
Still, CFRA Research analyst Shreya Gheewala maintained a Buy rating on the communication services stock. In addition to seeing strong growth in older demographics, "RBLX has launched its early stage ad platform, which we believe positions the company for advertising revenue gains in the second half of 2023," Gheewala writes in a note to clients.
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WeWork spirals on bankruptcy concerns
Meanwhile, WeWork (WE) spiraled 38.6% after the workspace solutions company reported earnings. In its second quarter, WeWork recorded a wider-than-expected loss of 21 cents per share. Revenue of $844 million also missed the mark. More concerning, however, was WeWork's note that there is "substantial doubt" about its ability to continue operating due to its considerable cash needs, member churn and lack of liquidity.
"This is a business that did nothing that hasn't been done many times before, but suggested that it had somehow launched a revolution with novel financial metrics to explain why it was great, despite not making the real money that one would normally expect a property company to," says Steve Clayton, head of equity funds at Hargreaves Lansdown. "Now the company has admitted that it is quite likely that WeWork simply doesn't."
PENN Entertainment and ESPN team up
In non-earnings news, PENN Entertainment (PENN) jumped 9.1% after the online sports-betting company inked a $1.5 billion deal with Walt Disney's (DIS, -0.7%) ESPN division. Under the terms of the agreement, PENN will rebrand its online sportsbook this fall as ESPN Bet.
"We believe the deal can bring the newly branded online sports betting into the top three in market share across the U.S. and Canada over the next five years," says CFRA Research analyst Zachary Warring (Buy). "PENN will leverage ESPN to acquire new customers and we expect significant market share gains."
As for the major indexes, the tech-heavy Nasdaq (-1.2% at 13,722) lagged as Nvidia (NVDA, -4.7%) and Tesla (TSLA, -3.0%) declined, bringing its month-to-date loss to 4.4%. The S&P 500 (-0.7% at 4,467) and the Dow Jones Industrial Average (-0.5% at 35,123) also closed lower.
Next up is the July Consumer Price Index (CPI) report, due out ahead of tomorrow's open, while the producer price index (PPI), which measures wholesale inflation, will be released Friday morning.
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