What happened
Shares of the Chinese e-commerce giant Alibaba (BABA -0.94%), software company Atlassian (TEAM -1.36%), and cybersecurity company Zscaler (ZS 1.84%) were all tumbling today, partly on the broader market sliding this morning as Chinese stocks fell and as investors expect lackluster quarterly results from major tech companies this week.
Alibaba's shares were down by 4.4%, Atlassian had dropped 6.1%, and Zscaler fell 6.8% as of 12:43 p.m. ET.
So what
Investors are worried about several things today, beginning with a week of important earnings releases from major tech companies. Alphabet and Microsoft will report their latest results after the bell today, and investors appear to be pessimistic about the potential outcomes. The S&P 500 was down by 0.9% by the afternoon.
Some tech stocks have rebounded since the beginning of this year, but today's poor performance in the market indicates that investors are biting their nails ahead of earnings reports. Alibaba, Atlassian, and Zscaler aren't immune to being influenced by this sentiment, and it's likely one of the main reasons why all of them were tumbling today.
Adding to the pessimism today is the fact that First Republic Bank just reported that deposits fell by a staggering 40% in the first quarter. While the bank says the deposits have now stabilized, the admission is a reminder that some banks may not be entirely out of the woods yet following the recent banking crisis.
Technology investors are watching the news about the economy closely, because high inflation and rising interest rates have been the catalyst for the massive drop in the share prices of many tech stocks over the past year.
And finally, Alibaba's shares are falling in addition to all of this news today as tensions between China and the U.S. rise and as investors worry about the Chinese economy. Sparked by diverging opinions over Taiwan's sovereignty, China and the U.S. haven't been on the best of terms lately.
This comes at a time when the Chinese economy may be in a deflationary stage as consumers and companies in the country are holding on tightly to their cash instead of spending it right now.
Alibaba's investors may also still be digesting the company's latest move to divide itself into six different companies. The move likely pacifies the Chinese government -- which had put pressure on Alibaba and other tech companies as they grew too large -- but investors generally don't like uncertainty, and this move makes things a bit unclear for Alibaba.
Now what
The share price drops for Alibaba, Atlassian, and Zscaler today shows just how concerned investors are still about a potential economic slowdown in the U.S. Rumors about a recession have been swirling for a while now, and tech investors may be starting to believe a downturn is around the corner.
Technology stocks have suffered over the past year, and investors are worried that more pain could be ahead if the U.S. officially enters a recession. Rising tensions between the U.S. and China aren't good for Alibaba -- or any tech stock, either.
While it's important for investors to know how macroeconomic problems and geopolitical issues will influence companies, it's also important for Alibaba, Atlassian, and Zscaler investors not to make long-term investment decisions based on daily market news.
