What happened
Shares of Apple (AAPL -3.70%), Amazon (AMZN -3.89%), and Microsoft (MSFT -3.31%) were all sliding this morning as investors processed the latest Federal Reserve interest rate hike and as investors worry that the Fed could potentially tip the economy into a recession.
Making matters worse today, the latest data shows that retail sales are slowing down.
As a result, Apple had fallen by 3.4%, Amazon had plunged 4%, and Microsoft had tumbled by 3.1% at 11:31 a.m. ET.
So what
The first bit of news that tech investors were focusing on this morning is that the Fed increased interest rates by an additional 50 basis points — pushing rates up to a 15-year high.
Image source: Getty Images.
While the latest rate increase was lower than the 75-basis-point increase of previous meetings, investors were disappointed that the Fed said that its new target rate of 5.1% is higher than many economists were expecting.
Additionally, the Fed said that the job market is still too robust for its liking.
All of that caused Apple, Amazon, and Microsoft investors to worry that the Fed will continue to take an aggressive approach to tame inflation and could end up pushing the economy into a recession.
Making matters worse for these stocks today was Commerce Department data showing that retail sales fell 0.6% in November, more than the 0.3% some economists had been expecting.
That drop was the largest in nearly a year.
Apple, Amazon, and Microsoft are all dependent on consumer sales for at least some segments of their overall businesses, so data showing a retail slowdown has investors worried.
Additionally, the Commerce Department data also showed that online sales fell 0.9% in November, another troubling trend for these companies.
Now what
Between rising interest rates, fears of a recession, and slowing retail sales, it’s not surprising to see these companies’ share prices falling today.
While Apple beat top- and bottom-line estimates in its fourth quarter (which ended on Sept. 24), the company’s iPhone sales and services revenue were below expectations.
Microsoft also beat expectations for its most recent quarter (which ended on Sept. 30), but it issued guidance that was weaker than expected, and its cloud revenue disappointed investors.
Meanwhile, Amazon missed analysts’ consensus revenue estimates in its latest quarter (ending Sept. 30) and issued lower-than-expected revenue guidance.
All this means that investors were already a bit on edge and keeping a close eye on what the economy is doing and how it could affect these tech stocks. And with retail sales falling and interest rates likely rising through 2023, Apple, Amazon, and Microsoft investors worried today that the coming year could be a difficult one.
That doesn’t mean these stocks aren’t still good long-term investments, but their share prices could remain volatile in the near term as investors process negative economic data.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Amazon.com, Apple, and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
