Tech stocks have been nursing a new year hangover, pushing the Nasdaq into correction territory. Momentum is building against companies with exciting promises to reshape the world, as investors turn to “value” alternatives such as oil and banking.
The tech sector now faces a crunch fortnight as its biggest names report results, including Microsoft on Tuesday, Tesla on Wednesday and Apple on Thursday. They must prove they can thrive in a post-lockdown world where the cost-of-living squeeze is leaving people with less money for tech products and services.
“The outlook for the Nasdaq 100 will be much clearer in two weeks,” says Matt Weller, global head of research at Forex.com and City Index. Soft earnings reports or weak guidance could see the index make one of its worst starts in over a decade.
Although a hesitant return to normal life has now been jolted by Omicron, smaller growth stocks such as the pandemic winners Peloton and Zoom have been under pressure for months. A near-record number of tech stocks have recently plunged at least 50% from their all-time highs.
The technology giants’ shares have had an incredible run, helping the S&P 500’s IT index to deliver blockbuster returns of 33% in 2021. But the sector lost about 10% in January.
Anxiety over US interest rate rises hurts the unprofitable tech firms promising big earnings in the future. The Federal Reserve, which meets this week, is likely to raise rates several times this year to tame US inflation, now at its highest since 1982.
The year 1982 was also when Time magazine presciently chose the personal computer as its person (or machine) of the year. Then, the notion of a company being worth 3 trillion dollars would have been staggering. Apple soared to the $3tn mark
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