Friday's Market Minute: Big Week from Big Tech

Investors loss of confidence in big tech this week stems from reluctance to rein in expenses. From a market perspective, caution going forward might be warranted. They are the largest of the bunch in terms of market cap, and there wasn’t much to desire out of any of them. Amazon and Microsoft said that growth in their cloud computing businesses is slowing more than expected as customers looked to control their spending growth. Google’s search advertising slowdown and Amazon’s downbeat forecast for next quarter added to fears that even the largest and most scalable technology giants are not immune to losing investor faith. The biggest disappointment was Meta due to a combination of margin contraction, revenue deceleration and a failure to pacify investors who were patiently waiting for cuts in capital expenditures related to the unproven metaverse project.

In terms of the economy, Q3 GDP reading came in with a solid 2.6% improvement in economic activity. This is welcome news considering consumer spending is softening, and business investment is clearly weakening. The US dollar is having a tough couple of weeks, providing relief to yields. The two-year Treasury yield which represents the policy target rate of the Fed has inched back about 20 basis points, and the 10-year and 30-year yields have fallen to their lowest levels in more than a week. Despite the tech wreckage, volatility as measured by the VIX has fallen, small cap stocks and major multinationals represented in the Dow 30 have held up well as dollar weakness shores up foreign sales.

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