Tech shares are posting their worst two-week stretch for the reason that pandemic started

What started as a third-quarter rebound has turned into a flop for tech investors.

The Nasdaq Composite plunged 5.1% this week after losing 5.5% the previous week. This is the worst two-week stretch for the tech-heavy index since it plunged more than 20% in March 2020 at the start of the US Covid-19 pandemic

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With the third quarter due to end next week, the Nasdaq is poised to post a third straight quarter of losses unless it can erase the 1.5% drop over the last five trading days of the period.

Investors have been dumping tech stocks since late 2021, betting that rising inflation and higher interest rates would have an outsized impact on companies that have risen the most during boom times. The Nasdaq is now just above its two-year low hit in June.

Markets have been dogged by continued rate hikes by the Fed, which on Wednesday raised interest rates by another three-quarters of a percentage point and said they will continue to rise well above current levels as it seeks to bring inflation down from its highest level since the early days 1980s. The central bank raised its federal funds rate to a range of 3% to 3.25%, the highest level since early 2008, after the third straight move of 0.75 percentage point.

While rising interest rates have pushed the 10-year Treasury yield to its highest level in 11 years, the dollar has strengthened. This makes US products more expensive in other countries and harms export-oriented technology companies.

“This is a double whammy in the tech space,” Cresset Capital chief investment officer Jack Ablin told CNBC’s TechCheck on Friday. “The strong dollar is not helping the technology. High 10-year Treasury yields don’t help technology.”

Among mega-cap companies, Amazon had its worst week, falling nearly 8%. Google parent Alphabet and Facebook parent Meta each slipped about 4%. All three companies are in the midst of cost-cutting or hiring freezes as they anticipate a combination of weakening consumer demand, tepid advertising spending, and inflationary pressures on wages and products.

Alphabet CEO Sundar Pichai faced heated questions from employees at an all-hands meeting this week, CNBC reported Friday. Employees expressed concerns about cost cutting and Pichai’s recent comments about the need to increase productivity by 20%.

Tech earnings season is about a month away and growth expectations are muted. Alphabet is expected to report single-digit revenue growth after growing more than 40% a year ago, while Meta expects a second straight quarter of declining revenue. Apple’s growth is expected to be just over 6%. Expectations for Amazon and Microsoft are higher at around 10% and 16%, respectively.

The past week has been particularly tough for some companies in the sharing economy. Airbnb, Uber, Lyft, and DoorDash all suffered drops of between 12% and 14%. In the cloud software market, which surged in recent years before collapsing in 2022, some of the biggest declines were in shares of GitLab (-16%), Bill.com (-15%), Asana (-14% ) and confluent (-13%).

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Stocks of the sharing economy this week

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Cloud giant Salesforce held its annual Dreamforce conference in San Francisco this week. During the financials-focused portion of the conference, the company announced a new long-term profitability target that reflected its determination to operate more efficiently.

Salesforce is targeting an adjusted operating margin of 25%, including future acquisitions, Chief Financial Officer Amy Weaver said. That’s higher than the 20% target that Salesforce announced a year ago for fiscal 2023. The company is attempting to reduce sales and marketing as a percentage of sales, in part by increasing self-service efforts and improving sales rep productivity.

Salesforce shares fell 3% on the week and 42% for the year.

“So many things are happening in the market,” co-CEO Marc Benioff said in an interview with CNBC’s Jim Cramer at Dreamforce. “Between currencies and the recession or the pandemic. All those things that you control a lot of powers with.”

CLOCK: Jim Cramer’s interview with Marc Benioff at Dreamforce