Weak economic growth, rising inflation and a strong dollar have taken a toll on the tech giants that have an outsize impact on the stock market.
Technology stocks wavered on Wednesday, after a series of disappointing earnings reports from industry heavyweights rattled investors.
The tech-heavy Nasdaq fell sharply at the open of trading, before paring its losses and trading close to flat. The S&P 500 retraced early losses and gained 0.6 percent.
Taking a step back, the Nasdaq has lost roughly 30 percent of its value this year, versus a 19 percent decline in the broad-based S&P 500. Technology companies were some of the biggest winners during the early stages of the pandemic, as people’s lives moved online, but growth is becoming harder to generate.
After the market closed on Tuesday, Microsoft reported its slowest revenue growth in five years and suggested that the difficult conditions might continue when it gave a financial forecast for the current quarter that fell short of Wall Street’s expectations. Its shares fell 5 percent on Wednesday.
Alphabet, Google’s parent company, said its profit dropped 27 percent from one year ago, with executives telling analysts that they had seen advertisers spend less on marketing for insurance, loans and mortgages, among other things. The company’s stock fell 6 percent on Wednesday.
Technology stocks have experienced significant volatility as investors fret about the economic outlook, with inflation and high-interest rates squeezing household and business budgets. The strong U.S. dollar also hurts multinational companies’ finances, since they earn less when converting their extensive foreign sales into dollars.
The tech sector accounts for more than a quarter of the S&P 500 index, giving it an outsize influence on the market as a whole. Alphabet, Amazon, Apple and Microsoft together account for nearly a fifth of the index’s value. Relatively small movements in these companies’ stocks can be worth billions of dollars in market value.
Meta, the parent company of Facebook and Instagram, is set to report its latest quarterly earnings on Wednesday. Jitters about the advertising market, reflected in Alphabet’s results, as well as recent reports by the social media company Snap and the music streaming service Spotify, have hit Meta’s shares, which fell 2 percent. On Monday, Brad Gerstner, the chief executive of the hedge fund Altimeter Capital, published a letter to Meta’s chief executive Mark Zuckerberg that urged him to reduce staff by 20 percent and cut spending by $5 billion a year.
Apple and Amazon will release their earnings reports on Thursday. Both companies are under pressure amid the gloomy mood surrounding tech stocks, with Apple down 0.6 percent and Amazon losing 1.5 percent on Wednesday.
Stephen Gandel contributed reporting.
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October 26, 2022 at 10:50PM
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Stock Market Falls as Investors Fret About Tech Growth - The New York Times
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