Since March 2020, the worst week for tech stocks has just occurred, due to the impact of Peloton and Netflix on investor confidence.

• Since March 2020, the Nasdaq experienced its most significant weekly decline, amounting to 7.6%.
• Concerns about weakening consumer demand have emerged due to recent developments at Peloton and Netflix, as investors prepare for quarterly results from major corporations.
• IBM, Microsoft and Intel all report results next week.

The Nasdaq had its worst week since the start of the pandemic as it fell below its IPO price, suffered its steepest drop in a decade, and chip stocks continued to struggle.

The Nasdaq experienced its largest decline since March 2020, with a 7.6% drop for the week, and it has now lost four consecutive weeks, the longest streak since April and May 2020.

As the new year approached, the narrative for tech stocks shifted towards outward rotation. The Federal Reserve's indication of impending interest rate hikes due to inflationary pressure caused shares of cloud-computing companies and other high-multiple stocks that had outperformed the market in recent years to plummet as the work-from-home theme began to unravel.

Despite some concerns, the business fundamentals remained strong and the economy was improving.

The confidence of the technology sector decreased this week due to negative news in certain areas, which increased concerns about the upcoming Q4 tech earnings reports.

On Thursday, Peloton announced preliminary quarterly results and revealed that the number of connected fitness subscribers would not meet expectations. Following this news, the company released a statement after CNBC reported that Peloton had temporarily halted production of its connected bikes and treadmills and was seeking ways to manage costs.

John Foley, Peloton's CEO, stated that significant corrective actions are being taken to enhance the company's profitability outlook and streamline costs across the organization, as was discussed in the previous quarter.

On Thursday, Peloton's stock price dropped by 24%, but on Friday, it experienced a partial rebound, leaving it down 14% for the week. Despite this, the stock closed at $27.06, below its $29 IPO price from 2019.

During the early days of the pandemic, when consumers were stuck at home and gyms were closed, Peloton experienced a surge in demand for its niche product.

On Thursday, a one-off event gained importance after hours when Netflix, a much larger company, surprised the market.

The video-streaming company anticipates adding 2.5 million subscribers in the first quarter of 2022, which is significantly lower than analysts' predictions of 6.93 million, as reported by StreetAccount. As a result, the stock experienced a 22% decline on Friday, marking the steepest drop in almost a decade, and a 24% decrease for the week.

The streaming audio service, gaming company, and Amazon all experienced declines in their stock prices, with the streaming audio service dropping 11%, the gaming company declining 13%, and Amazon having its worst week since 2018 with a 12% drop.

Speculative assets, including cryptocurrencies, experienced a market slide, causing trading apps to fall 14% and 17%, respectively.

Earnings season is here

The tech earnings season kicks off next week, with reporting on Monday, followed by on Tuesday and on Wednesday.

This week, Intel experienced the largest decline among semiconductor companies, falling 6.6%, while and each dropped more than 12%.

The PC market is predicted to slow down this year, according to research by IDC, which suggests that investors may be concerned about device sales and earnings forecasts.

Piper Sandler analysts downgraded AMD from buy to hold in a report on Thursday, citing the trajectory of computer sales. AMD will report its fourth-quarter results on Feb. 1.

Piper Sandler wrote that while we do not anticipate the company missing estimates in the next two quarters, we expect a slowdown in growth and a sluggish PC market to negatively impact the stock.

In 2021, the Nasdaq underperformed the S&P 500 and the Dow Jones Industrial Average, with the Nasdaq experiencing a 12% decline, the S&P 500 dropping 7.7%, and the Dow Jones Industrial Average falling 5.7%.

Since 2006, the S&P has not surpassed the Nasdaq in consecutive years. Despite it being early to predict the outcome of 2022, the tech industry is currently facing an unfavorable start, and investors are anxiously awaiting earnings season.

Nancy Tengler announced that we are adding to tech financials and energy.