Google, Amazon Suffer Market Setbacks on Sales Outlook

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While both on Thursday reported bumper profits in the past quarter, revenues came up short of expectations at Google and Amazon spooked the markets with a so-so forecast for the all-important holiday season coming up.

Investors focused on the negative.

In similar fashion, Goldman Sachs analyst Heath Terry reiterated his Buy rating for Amazon, saying he is still optimistic the company is in the early innings of several big markets.

While US economic growth kept apace despite trade wars, the same can not be said of USA corporate profit growth, as a slew of disappointing forecasts this earnings season showed how tariffs, rising wages and borrowing costs as well as jitters over geopolitical events are hurting companies.

In a time of low interest rates, Amazon and Google have offered investors the chance to hitch a ride on the fast-growing e-commerce, digital advertising and cloud-computing markets buoyed by a steady global economy, Bloomberg explained.

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Shares were set to open down nearly 9% on Friday. The division's operating profit, meanwhile, grew 77% over the same time period to $2.1 billion, accounting for more than a third of Amazon's total net profit for the period. Analysts' projected US$57.1 billion.

"With consumer sentiment and employment rates near 18-year highs and ongoing store closures in the USA, we believe Amazon's strong retail sales growth will continue through the balance of the year and beyond", the analyst added.

But the company also saw a windfall from its retail operations, particularly those in North America. "We're very happy not only in the strong membership numbers", Olsavsky said Thursday, "but also in the continued strength of engagement" of Prime's shipping benefits and Prime Video. Even with that wage increase, Amazon is still expected to post a 31 percent rise in operating income from the year earlier to $3.3 billion. The company continues to increase wallet share with existing cloud customers, and acquisition remains strong evidenced by Amazon's healthy pipeline of new enterprise clients.

The logo of Amazon is seen at the company logistics centre in Boves, France, August 8, 2018. In the previous quarter, the annual rate was a brisk 4.2 percent, the best in almost four years. Its "other" revenue, which largely comprises advertising sales, jumped 122% to $2.5 billion.

At 9:56 a.m. EDT the Dow Jones Industrial Average was down 274.85 points, or 1.10 percent, at 24,709.70, the S&P 500 was down 42.12 points, or 1.56 percent, at 2,663.45 and the Nasdaq Composite was down 144.96 points, or 1.98 percent, at 7,173.38.