S&P 500: Investors pay the price as 20 companies cut jobs hard

Employees are not the only ones feeling the pain of the surge in layoffs. Investors too.


Stocks of companies announcing the 20 biggest layoffs in the last 12 months, incl Amazon.com (AMZN), Ford engine (F) i Peloton Interactive (PTON), have fallen an average of 12.8% since their announcement, according to an Investor’s Business Daily analysis of data from Layoffstracker.com and S&P Global Market Intelligence. That’s dramatically worse than the S&P 500’s average decline of 1.3% over the same time periods.

In many ways, the reduction in the number of employees is a harbinger of even greater pain with the shares. And there will probably be more to come. US employers announced 154,329 job cuts in the fourth quarter, the most since the last quarter of 2020, according to Challenger, Gray & Christmas.

“Announced layoffs starting in 2022 are increasing,” said Philip Blancato of Ladenburg Thalmann Asset Management, noting particularly within the technology sector. “Since the first days of Covid, positions have not been reduced at such a speed.”

Pain in technology

Many of the layoffs are focused on the S&P 500 technology industry. And the stock is suffering from what appears to be management’s confirmation that it has pulled out.

During December, tech companies saw 16,193 layoffs, for a total of 97,171 this year, making them the leading industry to cut jobs in 2022, Challenger, Gray & Christmas says. The number of technology cuts increased by 649% compared to 12,975 in 2021.

And half of the top 20 announced layoffs in the last 12 months came from the technology or communications services sector. And the sector’s shares are also suffering. The Communications Services Select Sector SPDR ETF ( XLC ) has fallen 32.7% over the past 12 months, much worse than the S&P 500’s 16.3% decline over that time.

Looking at some of the investor pain

Amazon.com remains one of the biggest drivers of jobs. And investors are feeling the sting, too.

The online retail giant first announced plans to cut 10,000 jobs on November 15. Amazon shares fell 9.1% during that time, while the S&P 500 fell just 1.5%. It’s also important to note that Amazon continues to increase the cuts. It announced updated plans on January 4, 2023 to cut 18,000 jobs.

In terms of layoffs coinciding with the biggest stock losses, exercise equipment maker Peloton is suffering the most. Shares in the struggling company have fallen nearly 68 percent since it announced plans to cut 2,800 positions in February. During that time, the S&P 500 fell 13%.

And it’s important to note that jobs aren’t just being cut in technology. Ford Motor shares fell more than 19% after the automaker announced plans to cut 3,000 jobs in August.

Are job cuts a necessary catharsis for the S&P 500?

There are some cases, however, where investors seem almost relieved that some S&P 500 companies are cutting costs. Extraordinary free fall of stocks Meta platform ( META ) bottomed out in November around the time the company announced plans to cut 11,000 jobs. The stock is up 38% since then, while the S&P 500 is up 1.9%.

It is not clear whether the job cuts will continue. But one thing’s for sure: investors generally don’t like it any more than employees.

The biggest reduction in the number of jobs in a public company

New announcements in the past 12 months

Society Symbol Cancellations Published date Stock % ch. from Sector
Meta platform (TARGET) 11,000 9.11.2022 37.9% Communication services
Amazon.com (AMZN) 10,000 15.11.2022 -8.8% Consumer discretion
Cisco Systems (CSCO) 4,165 17.11.2022 10.0% Information technology
Ford engine (F) 3000 22.8.2022 -19.1% Consumer discretion
Seagate technology (STX) 3000 26.10.2022 -2.7% Information technology
Peloton Interactive (PTON) 2,800 8.2.2022 -67.1% Consumer discretion
Bilibili (WERE) 2400 July 1, 2022 7.4% Communication services
The Zillow Group (ZAGREB) 2000 2.11.2021 -58.9% Real estate
Fiserv (FISV) 1700 20.10.2022 5.0% Information technology
Morgan Stanley (MS) 1600 7.12.2022 0.1% Finances
Microsoft (MSFT) 1500 July 12, 2022 -13.5% Information technology
Carvan (CVNA) 1500 18.11.2022 -46.9% Consumer discretion
Snap (SNAP) 1,280 30.8.2022 -8.3% Communication services
DoorDash (DASH) 1,250 30.11.2022 -9.9% Consumer discretion
Coinbase Global (COIN) 1,100 June 14, 2022 -16.9% Finances
Lyft (LYFT) 1,100 3.11.2022 -4.9% Industries
Gen Digital (GENE) 1,100 10.11.2022 -5.8% Information technology
Shopify (STORE) 1000 July 26, 2022 -0.6% Information technology
Robinhood Markets (HOOD) 1000 September 14, 2022 -16.2% Finances
Twilio (TWLO) 1000 September 14, 2022 -28.9% Information technology
Sources: Layoffstracker.com, S&P Global Market Intelligence

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