Last week, many companies lost business hours. We saw weakness in many industries, from media to gambling, cloud computing and software sales. As we noted a year ago this month when the Nasdaq last closed at a record high, the pain in the tech sector knows no bounds. (To be clear, I’m not talking about the Apple (AAPL) release from Sunday evening regarding iPhone 14 Pro and Pro Max issues due to production delays in China due to Covid restrictions. That’s because supply isn’t related to demand. ) Meanwhile, we industries we saw a steady, remarkable increase between Despite a rough start to November, the Dow Jones Industrial Average posted a nearly 14% gain in October, its best month since 1976. There are many ways to measure industrial strength. Some like to use rails and they have been showing very strong numbers. Some like to use airways and they are as strong as I can remember. But for me, I like to soak up the wisdom of Nick Akins, the outgoing CEO of American Electric Power, the largest transmission company in the United States. When I interviewed him on Mad Money last week, I was shocked to learn that his business is accelerating with great strength in chemicals and paper, primary metals and, most importantly, oil and natural gas production. This is a typical picture of the American economy in 2022, one that cannot be managed by Federal Reserve Chairman Jerome Powell no matter what — even with a wholesale selloff of once-beloved stocks. Dichotomy is everywhere. We’re getting great production growth as well as great growth in travel and leisure and everything that comes with it. But in technology, especially anything related to software or semiconductors, we have a lot of freezes and cuts. When you combine industries with the power of travel — and the costs that come with it — you end up with higher prices for consumers on the move and greater costs once they get to their destination. I don’t see a glimmer of hope that these costs will go down. Mastercard (MA), Visa (VA), and American Express (AXP) validate that Americans are getting out and traveling like rarely before. I think this has to do, again, with post-Covid pandemic behavior. Sometimes you will hear about some kind of slowdown in travel. I know there was an attempt by Airbnb ( ABNB ) CEO Brian Chesky in the fourth quarter to slow spending on more luxurious apartments. After speaking with him on “Mad Money,” I can tell you from my own digs that nothing could be further from the truth: It’s something Marriott ( MAR ) and Expedia ( EXPE ) have confirmed. Not surprisingly, we continue to see strength in hiring for travel, leisure and entertainment. However, nothing really seems to be slowing this juggernaut down. Now I do not reject the delay in the apartment. It’s so palpable that the folks at Zillow ( Z ) made sure you know it’s a terrible time to buy a home, given the incredible rate hikes we’ve seen from the Fed. I know Powell mentioned a “lag” in his 2pm ET statement last week after the central bank’s November meeting – ahead of the portfolio replenishment press conference. But there is no delay in housing. We also heard some discouraging words about cars from Ernie Garcia, CEO of the incredibly troubled Carvana ( CVNA ). It’s tough times ahead for used cars. His negative comments sent his shares down nearly 39% on Friday, as many worried that he lacked the capital to sustain his projected sales pace and equity, and that the debt markets could even close for his company. But you don’t see the weakness bringing down the major players in the industry. The Carvana and Zillow calls don’t resonate because the auto and housing companies have already seen their stocks crushed. Which brings me back to tech, where I hear CEOs repeatedly hear the terms “macroeconomic uncertainty” and “facing headwinds” almost in unison on conference calls. Unlike housing and auto stocks, these took him on the chin every time. Some of the declines we’ve seen have been incredibly exaggerated, notably Atlassian ( TEAM ), down nearly 29% on Friday, and Cloudflare ( NET ), down 18%. Both are great companies. But we’re just not used to seeing companies of this caliber ever experience delays, as they help companies digitize, automate, and develop new software in all the mundane areas of development we can think of. Every word we are used to. I heard the same from Appian ( APPN ), another company that offers enterprise software solutions and another stock that sank more than 18% on Friday. Heaven knows enough they were created during a boom – and his stock was crushed when he cut his forecast. I wondered if anyone thought they would raise this. Maybe that’s because the people who own these stocks and their ilk simply didn’t see the slowdown coming until last week. They left these reserves at a record pace. But the sell-off was not limited to companies unaccustomed to stumbling. Shares of Twilio ( TWLO ), the maker of premium customer management and storage software, exploded once again, falling sharply on Friday, down nearly 35%. Of course, these stocks were so beloved that the creators of the exchange-traded fund (ETF) piled basket after basket of them together until they were all tied together. Even the best like ServiceNow (NOW), which had a big surprise and 13% pop on Oct. 27, couldn’t withstand the onslaught and has since given back all of its gains and then some. Unlike, for example, any car or apartment that hasn’t been digitized, these stocks are de-risked, so you won’t see an obvious advance, but you won’t see a decline, meaning only those who are brain-dead or hoping for an infinite speed-End of the Era are still in them. When I research software failures to see what the headwinds mean and how they affect companies, I come away with information that is all about technology concerns. The first is what we call a “top of the funnel” problem, which means that customer acquisition efforts are delayed. Acquiring new customers simply takes longer, or “stretched,” which is the code word of the moment. Existing customers are retained at the usual rate, so retention is not a problem. But it’s getting harder and harder to get them to do more. The so-called land and expand just does not happen. There are fewer landings and not much expansion, There are some fussy customers out there. Fintechs don’t spend; reasonable considering how much they already spend. Crypto companies are on a tightrope, and their problems extend to the heavy media sector. But I think not enough companies that need software are funded or taken public. At the same time, seeing an ever-widening funnel, these once-thriving tech companies somehow weren’t seeing any of it. Most, like Alphabet ( GOOGL ), were still hiring in the spring and summer. Many have the highest number of employees they have ever had. Their response is mostly to freeze hiring, although some are starting to lay people off. The latter, though, is very rare. It won’t happen next quarter, trust me. To me, all of this makes it difficult to stick to the stocks of companies that anticipate weakness, which means that soft goods companies will benefit greatly next year when commodity costs fall and the dollar struggles after an incredible run. That’s actually given to the consumer who stays liquid and likes to spend on smaller luxuries like cosmetics, Estee Lauder ( EL ) or iced lattes like Starbucks ( SBUX ). Now, I’ve watched the semi-finals many times and you know they need more powerful PCs, servers, gaming and mobile phones. Let me know if you find them stronger. I don’t. But the sale of this software is very reminiscent of the 2001 debacle. The only difference: Many of these companies can be profitable. They just don’t want to be. That’s changing now, but not fast enough to handle the moment we’re struggling and a group of stocks that just haven’t hit bottom. How to shoot down? As usual. Mergers and bankruptcies with only those with money in the banks and the most powerful customers get to the point where the Fed tightens and customers revive. (Jim Cramer’s Charitable Trust is long AAPL, GOOGL, EL and SBUX. See here for a complete list of stocks.) 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Jim Cramer on the NYSE, June 30, 2022.
Virginia Sherwood | CNBC
Last week, many companies lost business hours. We saw weakness in many industries, from media to gambling, cloud computing and software sales. The pain in the tech sector knows no bounds as we mark a year ago this month Nasdaq the latter closed at a record high. (To be clear, I’m not talking about him apple (AAPL) released on Sunday evening regarding iPhone 14 Pro and Pro Max issues due to reduced production due to Covid restrictions in China. Because they are not related to the offer.)