Nasdaq Rally Gets a Reality Check as Megacaps Miss

Traders piling back into tech stocks just got a sobering signal that they might have gotten ahead of themselves.

More than $200 billion is set to be wiped out from the combined market capitalizations of Apple Inc., Alphabet Inc. and Inc. after the trio reported results after the market close.

Apple and Google parent Alphabet missed estimates, while Amazon gave a disappointing forecast for its lucrative cloud-computing division — showing that demand for hardware, software, advertising and e-commerce is sputtering amid macroeconomic uncertainty and still-high inflation. Shares of all three slid, while futures contracts on the Nasdaq 100 Index were down 1.3% as of 6:47 a.m. in New York.

The reality check comes after a stellar start to the year for the Nasdaq 100, which had been on the brink of entering bull-market territory after a rebound spurred by speculation that the Federal Reserve will pivot to easier monetary policy. Bright spots including results from Meta Platforms Inc. — which soared 23% on Thursday after laying out plans to become leaner and more efficient — also helped.

“The big wild card for markets is: will the Fed be enough of a tailwind to offset the headwind of weaker revenue?,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “I expect revenue will weaken throughout the first half of the year. You saw it with Microsoft, and it looks like we’re seeing it with Amazon and Alphabet.”

The three reports may mark a turning point for a FOMO-fueled tech rally that persisted even after results earlier in the season from the likes of Microsoft Corp. and Intel Corp. sounded alarm bells about how earnings will hold up in an economic downturn. Strategists are warning that stocks may have run too far, too fast.