Big Tech stocks lose $170 billion after Microsoft declares earnings recession whistles

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Topline

Shares fell Wednesday after Microsoft’s quarterly earnings report fell far short of expectations, with top technology stocks leading the way as fears mount over the impact of subdued macroeconomic conditions on companies’ financial health.

Key Facts

Microsoft fell 4% in early trading, dragging its peers down as all five stocks in the FAANG grouping – Facebook parent company Meta (-0.2%), Amazon (-2.9%), Apple (-1. 8%), Netflix (-0.4%) and Google parent Alphabet (-1.6%) – and Tesla (-1.9%) were all in the red.

Those seven companies lost $171.7 billion in market cap as of 9:40 a.m. EST, led by Microsoft’s $72 billion dip.

Stocks fell largely amid Microsoft-fueled earnings worries, with the Dow Jones Industrial Average losing 0.6%, about 210 points, the S&P 500 down 1.1% and the tech-heavy Nasdaq down 1.6%.

The next few days will be crucial for this typically fast-growing stock, and for the market at large, with Tesla reporting earnings after the bell on Wednesday and Meta, Amazon, Apple and Alphabet next week.

This earnings season should provide answers to the question of how companies can weather the storm of an impending recession, with Wedbush’s Dan Ives saying the key question heading into the period is “How bad is it?” in a note on Monday, while Morgan Stanley chief investment officer Michael Wilson is already determined, he writes in a note on Sunday that his model is “convincingly bearish” and that an “earnings recession is imminent.”

Key background

Morgan Stanley predicts the S&P will fall as much as 25% in the first few months of 2023 to a two-year low of 3,000 as earnings disappoint. Long bastions of growth, the largest technology stocks largely underperformed the market in 2022, when all three indices suffered their worst annual performance since 2008. Tesla, Meta, Amazon, Apple, Microsoft, Netflix, Alphabet each fell 27% or more last year, and Meta and Tesla’s 68% and 64% declines, respectively, were among the 10 biggest declines on the S&P. Microsoft, which reported its slowest quarterly revenue growth in six years but showed significant growth in its critical cloud business on Wednesday, now faces a “deadlock between the bulls and the bears,” Ives said.

tangent

The west coast titans are leading the charge in a different way: fired. Microsoft said earlier this month it will cut 10,000 jobs, along with Amazon (18,000), Alphabet (12,000) and Meta (11,000) who have slashed their workforces in recent weeks.

Read further

Morgan Stanley warns ‘impending’ earnings recession will undercut stocks, but this is when bear market could endUKTN)

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