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Why Amazon Stock Took a Hit Monday

By Daniel Sparks – Dec 17, 2018 at 5:33PM

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Shares fell as much as 5.5%.

What happened

Shares of Amazon (AMZN 1.26%) fell sharply on Monday. The stock declined as much as 5.5% but finished the trading day about 4.5% lower.

The stock's decline was driven by a sell-off in the broader stock market.

Amazon employee holding a box in an Amazon fulfillment center

Image source:

So what

Highlighting the market's pullback on Monday, the S&P 500 declined as much as 2.5%. The index, however, finished the trading day down about 2%. The market's decline on Monday is widely considered to be driven by fears that the Federal Reserve may announce an increase in short-term interest rates at its year-end policy meeting on Wednesday.

Monday's decline brings the S&P 500's decline since Oct. 1 to about 13%. Amazon stock has fallen about 24% during this same time frame -- driven partly by outsize declines in many high-growth tech stocks and partly by management's weaker-than-expected fourth-quarter revenue outlook, published alongside Amazon's third-quarter results.

Now what

Amazon will be put to the test over the holidays. In the past, the company has done very well in its fourth quarter. Indeed, in the fourth quarter of 2017, revenue crushed management's own guidance for the period. This, of course, means Amazon is up against a tough comparison.

Management guided for a meaningful deceleration in revenue growth in Q4, but also admitted that the company's fourth quarter, seasonally its biggest, is very difficult to predict. Actual results, therefore, could come in either ahead of or below guidance.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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