What happened
Shares of Amazon (AMZN -2.30%), Apple (AAPL -1.36%), and Nvidia (NVDA -0.86%) were all falling this morning after the Commerce Department reported its latest inflation figures, which showed inflation remains persistently high.
The report said that the core personal consumption expenditures index rose 4.7% in May, only slightly less than expected and still a four-decade high.
Technology investors have been watching inflation figures very closely, and with today’s report, Amazon plunged 3.5%, Apple fell 2.4%, and Nvidia dropped 2.2%.
So what
The core personal consumption expenditures index is one of the main measurements that the Federal Reserve uses to track inflation, and while it fell slightly in May compared to the previous quarter and was below the 4.8% that some experts were expecting, it still shows that inflation is stubbornly high.
Image source: Getty Images.
Technology stocks have fallen hard as a result of the Federal Reserve’s hiking interest rates in order to tame inflation, and with today’s news, it appears that Amazon, Apple, and Nvidia investors don’t have an optimistic view of what’s ahead.
The Fed is likely to continue to make aggressive rate hikes, including a potential 50- or 75-basis-point hike at the officials’ next meeting in July.
Amazon, Apple, and Nvidia investors are looking at potential rate hikes and pulling back on these stocks, as they fear that fresh rate increases could slow the economy too much. If the economy slows too quickly, it could potentially hurt Amazon’s e-commerce sales, cause Apple to sell fewer devices, and curb spending on Nvidia’s semiconductors.
Investors in these companies are likely also pairing today’s inflation data with recent comments made about the stocks by analysts.
Evercore ISI analyst Amit Daryananian said earlier this week that if there’s a recession, Apple’s revenue declines would likely be more severe than during the Great Recession, because that economic slowdown occurred during consumers’ massive transition to smartphones.
Additionally, Bank of America analyst Vivek Arya said this week that he believes that the semiconductor industry could slow down in the second half of this year, though he’s still generally bullish on the stock. And finally, Amazon received two stock price target cuts by analysts this week, on fears of a potential recession and the company facing rising costs.
Now what
There’s no guarantee that a recession will come, of course, but that isn’t stopping some investors from exiting technology stocks as they look for seemingly safer places to put their money.
Recession fears are likely to continue putting pressure on Amazon, Apple, and Nvidia’s shares until the Fed is able to get inflation back down. But with investors unable to know when that could happen, shares of these stocks could remain volatile.
That doesn’t mean they won’t still make great long-term investments, but it does mean shareholders will have to stomach some additional share price swings.
