What Happened?
Shares of social network Snapchat (NYSE: SNAP) fell 6.2% in the morning session after anxiety and uncertainty rattled markets as the major stock indices pulled back in the morning session amid concerns about "reciprocal tariffs" to be announced later in the week. The planned tariffs, scheduled for April 2, 2025 (dubbed Liberation Day), were targeted at all countries where the United States had a trade deficit.
Simply put, if a US trading partner imposed higher tariffs on American goods than the US did on theirs, the "reciprocal tariffs" would apply.
The prospect of heightened trade tensions seemed to have stoked fears of stagflation (slower economic growth and elevated inflation) as the anticipated tariffs will likely raise input costs for businesses.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Snap? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Snap’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 12 days ago when the stock gained 5.5% on the news that stocks rebounded to start the session amid continued market volatility and moved slightly higher after the Federal Open Market Committee kept rates at 4.25% to 4.50% in its March 2025 meeting. The Jerome Powell-led committee also hinted at two more rate cuts for the year, saying, "Uncertainty around the economy has grown."
The good news was that holding rates steady and signaling two additional cuts this year meant no surprises (the market dislikes surprises).
The bad news was that the Fed reduced its outlook for growth to 1.7%, down from the previous projection of 2.1% in December. At the same time, the inflation outlook was raised to a 2.8% annual increase for core prices, up from the prior projection of 2.5%. This suggested the Fed saw the macro tilting towards a stagflation scenario, where inflation rises as economic growth slows.
Snap is down 23.3% since the beginning of the year, and at $8.62 per share, it is trading 49.7% below its 52-week high of $17.14 from May 2024. Investors who bought $1,000 worth of Snap’s shares 5 years ago would now be looking at an investment worth $725.11.
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