Gaming downturn? Roblox results make investors go oof! (2024)

Recession worries are swirling in the metaverse, too.

Gaming platform Roblox (RBLX) reported a bigger-than-expected loss for the second quarter, news that sent its stock tumbling 9% in the real world Wednesday morning.

Investors are worried about the fact that bookings, a key measure of future revenue, fell 4% in the quarter.

What's more, the company's average bookings per daily active user (ABPDAU) number, which looks at how much money people are spending to buy virtual goods, plunged 21%. In other words, people are keeping a closer watch on how they spend their Robux due to inflation concerns.

Roblox isn't the only video game company that's getting hit by growing fears of a weakening economy. Grand Theft Auto maker Take-Two Interactive (TTWO), which recently bought mobile gaming company Zynga, also disappointed Wall Street with its latest results, The stock fell 4% Tuesday on the news.

Take-Two CEO Strauss Zelnick warned on a conference call with analysts that gamers are becoming more cautious.

"I don't believe the entertainment business is recession proof or even necessarily recession resistant," Zelnick said, adding that "when you have 50% of big bank economists saying we think we might be in a recession in the next quarter or two, my attitude is the market believes we're in a recession right now, and as a consumer-facing company, we are seeing some softness."

Good news is good news, so let's celebrate for a moment the fact that prices didn't rise overall last month for the first time since November 2020.

OK, moment over.

Here's the bad news: Prices didn't rise for one reason, and one reason only: Falling energy costs. Gas has been down in the United States each day for nearly two straight months. Oil has come down below $90 a barrel after surging above $130 a barrel just a couple months ago.

Falling energy prices are certainly welcome, but we all know how volatile those prices can be. The ongoing war in Ukraine has made prices particularly sensitive to disruptions. And hurricane season's peak is right around the corner.

Energy prices fell 4.6% in July overall. Gas fell 7.7%, fuel oil tumbled 11%, natural gas prices were down 3.6% and transportation costs were 0.5% lower.

Stripping out energy, prices rose in practically every other category except for apparel (basically flat: -0.1%) and used cars (-0.4%).

Meanwhile, food prices rose another 1.1%. Between July 2021 and July 2022, food prices surged 10.9% -- the largest annual increase since the May 1979.

Electricity costs were 1.6% higher, which is no fun when you're trying to stay cool in an unending heat wave.

So let's cheer the fact that prices didn't rise overall. But July's report indicates that the Fed may not be having the desired effect on inflation, despite historic rate hikes. It seems high energy prices may have brought themselves down as demand began to evaporate.

The stock market sure liked Wednesday's inflation report, which showed price hikes took a break in July.

Dow futures surged 400 points, or 1.3%.

S&P 500 futures were 1.6% higher.

Nasdaq futures rose 2.3%.

The inflation report suggests Americans are finally getting some relief after 19 straight months of rising prices. It may also mean that the Fed can ease up on the gas just a bit instead of continuing its historic pace of rate hikes.

But for the Fed's next meeting, scheduled for September, the market still anticipates another three-quarter-point rate hike to keep prices from rising, according to CME's FedWatch Tool.

Runaway inflation took a breather in July, with consumer prices increasing by 8.5% year over year, a slower pace than the 9.1% increase in June, the Bureau of Labor Statistics reported Wednesday.

On a month-to-month basis, prices held steady, compared to the 1.3% increase in June.

Core inflation, which does not include volatile food and fuel components, was unchanged on a year-over-year basis after last month's 5.9% jump.

Months' worth of elevated numbers for the Consumer Price Index, which covers a wide array of goods and services Americans buy, pose a growing challenge for the Federal Reserve, which has committed to reining in soaring prices while trying to avoid plunging the economy into a recession.

So much for the bitcoin bounce? Coinbase (COIN) shares were set to tumble about 5% Wednesday morning after the crypto brokerage firm reported a whopping $1.1 billion loss, worse than expected.

Revenue plunged more than 60% from a year ago and more than 30% from the first quarter of 2022. The "crypto winter" that Coinbase CEO Brian Armstrong talked about earlier this year is clearly continuing.

"The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets," the company said late Tuesday in its earnings letter to shareholders.

Vin Diesel may not be able to save Coinbase. But investors are hoping BlackRock (BLK) might.

Shares of Coinbase, despite a more than 10% drop Tuesday before second quarter results were released, are up more than 35% in the past week. That rally is largely due to news that Coinbase is partnering with BlackRock to let the iShares owner's institutional clients trade bitcoin on Coinbase Prime.

Coinbase's stock is still down more than 65% this year though.

Most economists expect to see that inflation eased last month, to 8.7% from 9.1% in June. Again, that's not great — it's still historically high, but we're trending in the right direction.

Cooling inflation is good news, even if some of the factors behind it are... not so great.

Ultimately, people are pulling back spending because they're struggling to make ends meet after a year of relentless price increases that have far outpaced wage growth. Recession fears are real, and even if inflation has peaked, it's not likely to go back down to pre-pandemic levels quickly.

US stock futures rose slightly ahead of another key inflation report that is expected to show price hikes are finally beginning to cool off.

Dow futures were up 50 points, or 0.2%.

S&P 500 futures rose 0.2%.

Nasdaq futures were 0.4% higher.

US oil fell 0.7% to $90 a barrel. Average US gas prices fell to $4.01 a gallon.

We finally have some evidence that inflation might be taking a breather:

Inflation is on the minds of consumers, investors, politicians and, of course, the Federal Reserve. Will the pace of price increases finally start to cool a bit?

Economists surveyed by Reuters are forecasting that consumer prices rose 8.7% over the past 12 months. That is still an historically high level but it would be a slowdown from the9.1% increase through June.

Investors recognize that inflation isn't going to magically disappear overnight. But any signs of pricing pressures beginning to abate (even modestly) should be cheered.

Consumers would be thrilled, too. Food giantTysonhas noticed a big impact from inflation: shoppers are ditching more expensive beef for cheaper chicken. Americans have been routinely faced withsticker shock at the supermarketin the past year.

But there is some good news for consumers who prefer clicks to bricks. After a more than two-year stretch of monthly increases in online retail prices, Adobe recently reported that e-commerce prices fell 1% year-over-year in July.

Prices for electronics and toys sold online dropped by the largest amount. Apparel was cheaper to buy online, too. But grocery prices rose in July. And the prices of pet products online surged nearly 13%, hitting a record in the process.