Some US firms have announced hiring slowdowns and layoffs in recent weeks amid fears of recession
As top tech companies prepare to release their quarterly earnings reports starting next week, investors are bracing for bad news.
Several US tech companies have announced hiring slowdowns and layoffs in recent weeks, and the difficulties are expected to continue. “It’s not a great time for tech in general,” said Paul Verna, an analyst at Insider Intelligence, a market analysis firm. “There is no question that companies are going to be spending less, cutting back budgets, and maybe implementing hiring freezes. None of that is good news for the next quarter.”
Netflix, Meta, Google, Twitter and Tesla all have earnings calls scheduled in the next weeks. The reports will come amid growing fears of a recession as inflation continues to rise. On Wednesday, the US Labor Department released new data that showed the consumer price index rose 9.1% in June from the same month a year earlier, marking the largest gain since 1981.
The rising rates will probably bolster plans from the Federal Reserve to raise interest rates, which could further spook investors afraid of a slowing economic expansion, said Haris Anwar, senior analyst at Investing.com.
“The US economy will slip into a recession in the next 12 months if the Fed continues to hike interest rates,” he said. “That’s the main reason we’re seeing a huge sell-off in high-growth stocks as investors move their funds to the areas of the market which are relatively safe.”
Those high-growth stocks include many in the tech industry. Some investors have forecasted a difficult earnings season, with researchers at Factset anticipating a growth rate of 4.3% in the wider S&P Index – the lowest figure since the last quarter of 2020.
The sector has been struggling for months. In April, Amazon executive Jeff Bezos issued a stark warning that the tech boom experienced during the pandemic would soon be coming to an end.
Apple earlier in 2022 lost its status as the most valuable company in the world, contributing to a drop of 13% in the larger Nasdaq Composite in April – a drop of more than 30% from record highs the previous year.
Meanwhile, many large tech firms have announced hiring slowdowns or cuts. Alphabet, the parent company of Google, said in a staff memo in June it would be “slowing the pace of hiring” into 2023. Spotify is cutting hiring plans by 25%, according to Bloomberg.