The stock market was down on Friday afternoon, with the tech-heavy Nasdaq hurting the most. While it's unclear exactly what drove the decline, worries about trade relations with China and a potential economic slowdown might be playing a role.

Index Change at 2:10 p.m. EDT
Dow Jones Industrial Average (DJINDICES:^DJI) (0.65%)
S&P 500 (SNPINDEX:^GSPC) (0.26%)
Nasdaq Composite (NASDAQINDEX:^IXIC) (0.72%)

Data source: Yahoo! Finance.

Suffering steeper declines than the broader market were Atlassian (NASDAQ:TEAM) and Johnson & Johnson (NYSE:JNJ). The software company slumped on first-quarter results that just weren't good enough, while the consumer health giant tumbled following a voluntary recall of a signature product.

Atlassian stumbles despite solid results

An across-the-board earnings beat wasn't enough to prevent a steep decline for software-as-a-service stock Atlassian. Shares were down 6.9% at 2:10 p.m. EDT following a fiscal first-quarter report that failed to keep investors happy. Including Friday's decline, Atlassian stock is down around 22% since peaking a few months ago.

A man with head on table, with declining chart in background.

Image source: Getty Images.

There was nothing wrong with Atlassian's numbers. Revenue came in at $363.4 million, up 36% year over year and $11.6 million ahead of analyst expectations. The company added 7,060 net new customers during the quarter, bringing its total paying customer count to 159,787.

On a non-IFRS (adjusted) basis, Atlassian reported earnings per share of $0.28, up from $0.20 in the prior-year period and $0.04 higher than analysts were expecting. The company's guidance was also fine. For the full year, Atlassian expects revenue between $1.560 billion and $1.574 billion and non-IFRS EPS of $1.00. The revenue guidance was entirely ahead of analyst estimates, while the EPS guidance missed by just $0.01.

While Atlassian's results looked good on an absolute basis, they apparently were not enough to justify the stock's nosebleed valuation. Even after Friday's decline, Atlassian is valued at roughly $27 billion. That works out to a price-to-sales ratio of 17, using the company's guidance, and a price-to-adjusted earnings ratio of more than 100.

That's an awfully rich valuation, and it's making gains tough despite strong double-digit revenue growth.

A recall for Johnson & Johnson

Shares of Johnson & Johnson had shed 5.7% by 2:10 p.m. EDT after the company announced a voluntary recall of thousands of bottles of baby powder. The move was prompted by the U.S. Food and Drug Administration finding trace amounts of asbestos in a sample purchased from an online retailer.

This is the first time the company has recalled its baby powder for asbestos contamination and the first time U.S. regulators have found asbestos in the company's baby powder products, according to Reuters.

In the press release announcing the recall, the company said that at this point, it can't confirm if cross-contamination caused a false positive, if the seal on the tested bottle was intact, or if the tested bottle was authentic or counterfeit. The company claimed that the FDA had found no asbestos in testing as recently as last month.

While this recall only affects a single lot shipped in 2018 and involves very low levels of contamination, the damage to the company's reputation is difficult to predict.

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