U.S. stock indexes fell on Friday after dismal quarterly revenue from Twitter and Snap triggered declines in social media and ad tech firms, countering gains in American Express following an upbeat forecast.

By early afternoon, Snap Inc's shares plunged nearly 40%, after the Snapchat owner missed revenue targets and declined to make a forecast on Thursday, while Twitter Inc slipped 1.2% following a surprise fall in revenue.

The social media sector is expected to post the slowest ever global revenue growth in the second quarter after a blowout 2021.

Online ad giants Meta Platforms Inc and Alphabet Inc tumbled 7.5% and 5.6%, respectively, weighing on the Nasdaq.

Meta and Alphabet are set to post their earnings next week, along with mega-cap peers including Apple Inc, Microsoft Corp and Amazon.com Inc.

The S&P 500 communication services sector tumbled 4.4%, leading sectoral declines.

"This can be interpreted as a warning signal that profitability is under pressure as the economic environment is slowing," said Lindsey Bell, chief money & markets strategist at Ally Invest, Charlotte, North Carolina.

Investors are focusing on the Federal Reserve's meeting and second-quarter U.S. gross domestic product data next week. While the U.S. central bank is expected to raise interest rates by 75 basis points to curb runaway inflation, the GDP data is likely to be negative again.

Meanwhile, a survey on Friday showed that U.S. business activity contracted for the first time in nearly two years in July, deepening concerns about an economy stunted by high inflation, rising interest rates and dwindling consumer confidence.

Red-hot inflation forced Verizon Communications Inc to cut its annual adjusted profit forecast, sending its shares down 7.4%. American Express Co rose 2.6%.

Still, the S&P 500 and the Dow were set to end the week with their biggest gains in nearly a month, with growth stocks doing most of the heavy lifting after markets cheered quarterly reports from Tesla Inc and Netflix Inc.

At 12:06 p.m. ET the Dow was down 72.07 points, or 0.22%, at 31,964.83, the S&P 500 was down 29.70 points, or 0.74%, at 3,969.25, and the Nasdaq Composite was down 191.42 points, or 1.59%, at 11,868.19.

"The U.S. economy is relatively strong compared to expectations ... earnings are likely to be a positive catalyst as companies are doing better than investors had feared," said Jay Hatfield, chief executive and portfolio manager at InfraCap in New York.

Analysts now expect year-on-year S&P 500 profits to grow 6.2% for the second quarter, down from the 6.8% estimate at the start of the three-month period, according to Refinitiv data.

Advancing issues outnumbered decliners for a 1.12-to-1 ratio on the NYSE, while declining issues outnumbered advancers for a 1.94-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 31 new lows, while the Nasdaq recorded 23 new highs and 51 new lows.