Nasdaq hits correction territory, tech sector faces post-lockdown crunch
3 Min Read
Nasdaq could make one of its worst starts in over a decade, as big tech companies report their results, which do not seem to be promising.
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The tech giants’ sector lost about 10% in Jan. after experiencing great success in 2021. (AFP)
After the Nasdaq closed on Wednesday more than 10% below its November all-time high, it was confirmed the stock index was in a correction.
The tech sector seems to be in deep water almost 2 weeks before big companies such as Tesla, Microsoft, and Apple report their results. Such companies have to prove they can survive following the global lockdown, at a time when people are barely able to manage the increasing cost of living, and tech products are becoming of less priority.
Matt Weller, global head of research at Forex.com and City Index noted, “The outlook for the Nasdaq 100 will be much clearer in two weeks.” The index could make one of its worst starts in over 10 years.
Although Omicron has now shaken the not-so-sure return to life as we knew it before, smaller growth stocks such as Zoom and Peloton have been under pressure for months. The number of tech stocks has recently decreased at least 50% from the number it was at their highest.
The technology giants’ sector lost about 10% in January after experiencing great success in 2021.
Unprofitable tech companies which promise significant earnings in the future are worried over the US increase in interest rate. In a meeting this week, the Federal Reserve is most likely increasing the rates to tame inflation, which is at its highest numbers since 1982.
After Apple became the first company to hit $3tn stock market value in early January, it must now solve problems in global supply chains to keep the same level.
Analysts estimate a rise in Apple’s revenue by 6% year-on-year in the last quarter, beating last year’s record profits of $111.4 billion. Earnings could be up 13%, but the company still faces the risk of a marked slowdown in momentum. Russ Mould and Danni Hewson of AJ Bell warn that "due to the tough base for comparison caused by a huge spike in demand for iPhones, iPods and iMacs in 2020-21 as people worked from home, sought to stay in touch with people they could not meet or fought boredom by looking for things to do and watch online”.
On another level, Tesla's investors and customers are keen to know more about models they have been waiting for a long time, such as the Cybertruck pickup and Roadster sports model. The company has achieved excellent production targets in the last quarter, but its shares dropped this month after references to the Cybertruck entering production this year disappeared from Tesla's website.
And even if the tech giants reach their targets, they would still be under scrutiny. Meta, the owner of Facebook, which will report on Feb. 2, is being targeted by regulators who want to break it up.
