Pedestrians walk past the New York Stock Exchange.
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What started as a third-quarter rebound has turned into a slump for tech investors.
The Nasdaq fell 5.1% this week after losing 5.5% the previous week. This marks the worst two-week stretch for the tech-heavy index since it fell more than 20% in March 2020, the start of the Covid-19 pandemic in the US
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With the third quarter ending next week, the Nasdaq is poised for a third straight quarter of losses unless it can erase what is now a 1.5% drop over the last five trading days of the period.
Investors have been dumping tech stocks since late 2021, betting that rising inflation and higher interest rates would have a huge impact on the companies that rallied the most during the boom. The Nasdaq is now just above a two-year low since June.
Hammering markets this week continued action by the Fed, which on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and said they would continue to move well above their current level as it tries to reduce inflation from higher levels since the early 1980s. The central bank raised its federal funds rate to a range of 3%-3.25%, the highest since early 2008, after its third consecutive 0.75% move unit.
Meanwhile, as rising interest rates have pushed the 10-year Treasury yield to an 11-year high, the dollar is strengthening. That makes U.S. products more expensive in other countries, hurting tech companies that rely on exports.
“This is a one-two punch in technology,” Jack Ablin, chief investment officer at Cresset Capital, told CNBC’s “TehcCheck” on Friday. “A strong dollar doesn’t help tech. High 10-year yields don’t help tech.”
Among the group of large-cap companies, Amazon had the worst week, falling nearly 8%. Google parent Alphabet and Facebook parent Meta were down about 4%. All three companies are in the midst of cost-cutting or hiring freezes as they reckon with some combination of weakening consumer demand, low ad spending and inflationary pressures on wages and products.
As CNBC reported Friday, Alphabet CEO Sundar Pichai faced intense questions from employees at an all-party meeting this week. Executives 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 are muted. Alphabet is expected to post single-digit revenue growth after growing more than 40% a year earlier, while Meta is looking at its second straight quarter of declining sales. Apple’s growth is expected to be just over 6%. Expectations for Amazon and Microsoft are higher, at around 10% and 16%, respectively.
The last week has been particularly difficult for some companies in the sharing economy. Airbnb, Uber, Lyft and DoorDash fell between 12% and 14%. In the cloud software market, which has soared in recent years before plunging in 2022, some of the biggest decliners were in shares of GitLab (-16%), Bill.com (-15%), Asana (-14%) and Confluent ( -13%).
Share economy shares this week
Cloud giant Salesforce held its annual Dreamforce conference this week in San Francisco. During the segment of the conference focused on financial metrics, the company announced a new long-term profitability goal that showed its determination to operate more efficiently.
Salesforce is targeting an adjusted operating margin of 25%, including future acquisitions, CFO Amy Weaver said. That’s up from the 20% goal Salesforce announced a year ago for fiscal 2023. The company is trying to reduce sales and marketing as a percentage of revenue, in part through more self-service efforts and by improving productivity for sellers.
Shares of Salesforce fell 3% for the week and are down 42% for the year.
“There are so many things going on in the market,” co-CEO Marc Benioff told CNBC’s Jim Cramer in an interview at Dreamforce. “Between currencies and the recession or the pandemic. All those things that make you navigate a lot of forces.”
I’M WATCHING: Jim Cramer’s interview with Marc Benioff at Dreamforce