Tech stocks are in their worst two-week stretch since the start of the pandemic

Pedestrians walk past the New York Stock Exchange.

Michael Nagle | Bloomberg | Getty Images

What started as a third-quarter recovery turned into a flop for tech investors.

The Nasdaq Composite lost 5.1% this week after losing 5.5% the previous week. That marks the worst two-week stretch for the tech-heavy 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 ending next week, the Nasdaq is poised for a third straight quarter of losses unless it can erase its current 1.5% decline over the period’s final five trading days.

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 rallied most during the boom. The Nasdaq now sits just above a two-year low set in June.

Markets were weighed down by continued interest rate hikes by the Fed, which raised benchmark interest rates by another three-quarters of a point on Wednesday and said it would continue to hike as it tries to bring inflation down from the highest levels since then. Early 1980s. The central bank raised the federal funds rate to a range of 3-3.25%, the highest since early 2008.

Meanwhile, the dollar is strengthening as rising rates push the yield on the 10-year Treasury to an 11-year high. That makes U.S. products more expensive in other countries and hurts export-heavy technology companies.

“It’s a one-two punch for technology,” Jack Ablin, chief investment officer at Cresset Capital, told CNBC’s “TechCheck” on Friday. “A strong dollar doesn’t help tech. 10-year high Treasury yields don’t help tech.”

Watch CNBC's full interview with Cresset Capital's Jack Ablin

Among the mega-cap group, Amazon had the worst week, down nearly 8%. Google parent Alphabet and Facebook parent Meta each fell about 4%. All three companies are in the midst of cost-cutting or hiring freezes as they factor in some combination of weak consumer demand, modest advertising spending and inflationary pressure on wages and products.

As CNBC reported Friday, Alphabet CEO Sundar Pichai faced heated questions from employees at an all-hands meeting this week. Employees expressed concern over Pichai’s recent comments about cost cutting and the need to increase productivity by 20%.

Tech earnings season is about a month away, and growth expectations are muted. Alphabet is expected to report single-digit revenue growth after rising more than 40% a year ago, while Meta is looking at a second straight quarter of declining sales. Apple’s growth is expected to be slightly more than 6%. Expectations are higher for Amazon and Microsoft, 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 experienced declines of between 12% and 14%. In the cloud software market, which has been on the rise in recent years before falling in 2022, the sharpest decliners were GitLab (-16%), (-15%), Asana (-14%) and Confluent (-). -13%).

Sharing economy stocks this week


Cloud giant Salesforce held its annual Dreamforce conference in San Francisco this week. During the financials-focused portion of the conference, the company announced a new long-term profitability target that shows its determination to operate more efficiently.

Salesforce is targeting an adjusted operating margin of 25%, including future acquisitions, Chief Financial Officer Amy Weaver said. That’s up from Salesforce’s 20% target for fiscal 2023, which it announced a year ago. The company is trying to lower sales and marketing as a percentage of revenue, in part through greater self-service efforts and increased productivity for salespeople.

Salesforce shares are down 3% for the week and 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 currencies and a recession or a pandemic. It all shows that you’re managing multiple forces.”

WATCH: Jim Cramer’s interview with Marc Benioff at Dreamforce

Watch Jim Cramer's full interview with Salesforce CEO Marc Benioff

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