August is lining up to be the worst since 2001 for the DJIA and S&P 500, and the worst August in 12 years for the Russell 2000. That performance is setting a lot of people on edge heading into September, which is traditionally the market’s worst month.
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Today’s sell-off is about more than just that Fed statement. The global growth story is getting clipped, and you can see it in the UK and in China, and in the tech sector as well, which is coming under a lot of pressure this week.
Need some uplifting economic news? Look no further than yesterday’s comments from Cisco (CSCO) CEO John Chambers.
He sounded outright giddy about the recovery’s prospects, praising the economy for entering a “new phase of the recovery,” and added this is “one of the most robust positive turnarounds I’ve seen in my career.”
Bold words, which come after the giant maker of networking gear said its quarterly profit rose 23% from a year ago, while revenue jumped 8% – marking the first increases for both metrics in a year.
“The economic recovery may have found its chief cheerleader,” Tom Petruno writes at LA Times’ Money & Co blog. “And he lives in Silicon Valley – not Washington.”
Tech has been a bright spot throughout earnings, he notes, suggesting capital spending is picking up – possibly more robustly than previously expected. Still, investors have chosen to take profits instead of running tech stocks higher after last year’s surge. S&P 500 tech sector is off about 6% year-to-date, compared to about a 2% overall decline for the index.
Nevertheless, Cisco shares were recently up 1.3% at $23.38, bucking the trend of a broad market selloff that has the Dow off 1.7% and below 10100. Cisco, incidentally, is the only one of the 30 Dow components clocking in with a gain this morning.
Local review website Yelp.com reportedly has turned down Google’s (GOOG) $500 million offer, marking yet another curious event in the world of tech start-ups.
TechCrunch’s Michael Arrington reports Yelp CEO Jeremy Stoppleman walked away from “an all-but-signed deal” as the two companies had agreed on a price and were working through the acquisition’s final details. But “something happened” and Yelp notified Google over the weekend that it wasn’t going to sell, he says.
The news comes on the heels of reports that Twitter may actually turn a profit this year. The microblogging sensation will make $25 million from search deals with Google and Microsoft (MSFT), according to Bloomberg, which estimates Twitter’s operating costs between $20 million to $25 million a year.
And just a few days ago, Digital Sky Technologies, a Russian firm that has invested in Facebook, said it is buying a $180 million stake in social-gaming company Zynga.
These developments prompt VC Paul Kedrosky to wonder whether the tech world has gone crazy, or if the industry is on the verge of something big.