Tech Stocks Face Another 10% Drop or More as Strong Dollar Hits Profits

(Bloomberg) — The great tech selloff of 2022 is far from over as investors brace for earnings misses that may spur a more than 10% plunge in the Nasdaq 100.

More than two-thirds of 914 respondents in the MLIV Pulse survey think profits of the technology companies will disappoint the market throughout 2022. Firms including Alphabet Inc.’s Google are at risk of advertisers cutting spending as the global economy struggles, while streaming services including Netflix Inc. face an exodus of price-sensitive subscribers with consumers tightening their belts.

The Nasdaq 100 is down about 31% so far this year, wiping trillions of dollars in market value, as investors reassess the post-pandemic value of many business models. Interest-rate hikes are hitting stocks and diminishing the value of their future earnings. Inflation is driving up costs, while a stronger dollar is weighing on profits and the threat of recession is growing. Retailers such as Amazon.com Inc. are finding some their direct responses to the Covid-19 pandemic — such as massive investments in warehouses and workers to pack products in them — are coming back to bite them.

Apple Inc. said it will raise the price of its App Store purchases across Asia and countries that use the euro, as the value of foreign currencies collapses relative to the dollar. Microsoft Corp. lowered its forecast because of the currency’s strength in June. And in July, Sony Group Corp. warned investors about the impact of the global economic slowdown, especially in Europe, and the adverse effects of the strong dollar on its financial results. The Bloomberg dollar index, which tracks greenback’s performance against 10 leading global currencies, has set new record since those announcements were made.

Tech’s earnings are projected to lag the S&P 500 in the third and fourth quarters. Info tech’s earnings per share are estimated to fall 6.6% year-over-year in the third quarter, compared to a 3.2% gain for the overall S&P 500, according to Bloomberg Intelligence data. The Nasdaq 100’s 12-month forward EPS has dropped about…

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