Morning Markets: Yesterday was terrifically bad for most tech companies. Let’s get a handle on the carnage.
Welcome to Q3 2018 Earnings Season, coming to you live through the prism of market uncertainty.
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Unlike other recent quarters, tech shares do not seem poised to report another strong quarter while the major indices rise. Instead, tech may prove to be more of a mixed bag from a results perspective this cycle, and is busy reporting its performance in an unsteady stock market.
Yesterday’s action was tough. Markets were down, but tech fell even more sharply. Here’s CNBC’s summary of the mess:
“Stocks plummeted on Wednesday as a sharp drop in tech shares and worries about corporate earnings added fuel to this month’s steep pullback.
The Dow Jones Industrial Average dropped 608.01 points at 24,583.42 and erased all of its gains for 2018. The S&P 500 dropped 3.1 percent to 2,656.10 and also turned negative for the year. The Nasdaq Composite fell 4.4 percent to 7,108.40— entering correction territory — as Facebook, Amazon, Netflix and Alphabet all traded lower.”
A few things to note from that. First that the two key, non-tech American indices have lost their gains for the year, and one is negative. And second, that the tech-heavy Nasdaq fell even further, entering correction territory (a 10 percent or greater decline in value). Those are big, and bad, bits of news. Especially as many private tech companies are banking on 2019 being their IPO window.
I’d wager that 2019 won’t be the year of tardy unicorn IPOs if the market keeps deteriorating.
Looking more specifically, Cloudera was down a mile yesterday (8.6 percent). As was Hortonworks, its future partner (8.77 percent). New Relic was down (5.76 percent). Twilio and Okta were off over 7 percent apiece. Blue Apron fell to nearly a dollar. Netflix lost huge chunks of value (9.4 percent).
And the Big Five (Microsoft, Amazon, Alphabet, Apple, Facebook) lost over $183 billion in aggregate market cap at once. And this all came after we noted that SaaS and cloud stocks were under pressure.
It was hard, really, to find anyone up in regular trading. However, good job to Yext, which rose 3.4 percent yesterday.
A Small Reprieve
There has been some good news since markets closed Wednesday afternoon.
Tesla reported a profit, sending its shares higher. Microsoft smashed expectations, and despite more slowdown in percent growth at its cloud computing group, rose after reporting earnings. And this morning, Twitter is up like a rocket after beating expectations. (MarketWatch’s Max Cherney: “Shares of Twitter Inc. are soaring 13% […] after the company reported better-than-expected revenue and earnings for the third quarter, though monthly user numbers fell short of expectations.”)
But that’s a thin veneer of positivity on the hide of yesterday’s declines. It will take a lot more of all that to get things back to normal.
Top Image Credit: Li-Anne Dias.