What started as a rebound in the third quarter has turned into a setback for tech investors.
The Nasdaq Composite down 5.1% this week after falling 5.5% last week. That marks the worst two-week stretch for the heavy tech index since it fell more than 20% in March 2020 at the start of the Covid-19 pandemic in the US.
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With the third quarter expected to end next week, Nasdaq is poised to cut its losses for a third straight quarter unless it can erase its current 1.5% decline in the last five trading days of the period. this.
Investors have been dumping tech stocks since late 2021, betting that rising inflation and higher interest rates will have a big impact on the companies that outperformed during the boom. Nasdaq is now above a two-year low set in June.
Markets hit by Fed rate hikes, on Wednesday benchmark interest rate hike added three-quarters of a percentage point and said it will continue to climb above current levels as it tries to reduce inflation from its highest levels since the early 1980s. The central bank has raised its federal funds rate up to the 3%-3.25% range, the highest level since early 2008, after a third consecutive 0.75 percentage point gain.
Meanwhile, as rising rates pushed 10-year Treasury yields to 11-year highs, the dollar consolidate. That makes American products more expensive in other countries, hurting export-heavy tech companies.
Jack Ablin, chief investment officer at Cresset Capital, told CNBC’s “TechCheck” on Friday: “This is a one-of-a-kind punch in technology.” “A strong dollar doesn’t help tech. High 10-year Treasury yields don’t help tech.”
Among large-cap companies, Amazon had its worst week, falling almost 8%. Google’s Parents Alphabet and parents Facebook Meta each slip is about 4%. All three companies are in the process of cutting costs or freezing hiring, as they account for some combination of weakening consumer demand, low advertising spending, and inflationary pressures on money. wages and products.
Like CNBC report on Friday, Alphabet CEO Sundar Pichai faced heated questions from employees during this week’s hand-in-hand meeting. Employees expressed concern about cost-cutting and recent comments from Pichai about the need to improve productivity by 20%.
Tech earnings season is about a month away, and growth expectations have been muted. Alphabet is expected to report single-digit revenue growth after growing more than 40% a year earlier, while Meta is looking at a second straight quarter of declining sales. Apple Growth is expected to be just over 6%. Expectations for Amazon and Microsoft higher, about 10% and 16% respectively.
The latest week has been particularly difficult for some companies in the sharing economy. Airbnb, Uber, Lyft and DoorDash all have been reduced from 12% to 14%. In the cloud software market, which has skyrocketed in recent years before plunging in 2022, some of the biggest declines have been in shares of Microsoft. GitLab (-16%), Bill.com (-15%), Asana (-14%) and Confluence (-13%).
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Giant cloud Sales force held its annual Dreamforce conference this week in San Francisco. During the part of the conference targeting financial indicators, the company announced new long term profit target that shows a determination to be more efficient.
Salesforce is aiming for a 25% adjusted profit margin, including future acquisitions, said Chief Financial Officer Amy Weaver. This is up from the 20% announced by Target Salesforce A year ago for its fiscal year 2023. The company is trying to reduce sales and marketing as a percentage of sales, in part through a greater self-service effort and through improved productivity for salespeople.
Shares of Salesforce are down 3% for the week and down 42% for the year.
“There’s a lot going on in the market,” co-CEO Marc Benioff told CNBC’s Jim Cramer in an interview at Dreamforce. “Between currency and recession or pandemic. All these things you’re navigating multiple forces.”