U.S. consumers are starting to tighten their belts. That’s bad news for Big Tech

It’s been a brutal start to 2022 for Wall Street, but Main Street has proved surprisingly resilient this year.

Despite all the economic agitation swirling around us—high inflation, rising interest rates, record-high gas prices, a sagging stock market—consumer spending remained robust. Americans have been willing to keep shelling out for smartphones, computers, and ride shares—even if it meant tapping their savings or slapping down a credit card.

Those days, however, might be numbered.

As the Federal Reserve prepares for Wednesday afternoon’s announcement of a potentially substantial interest rate hike, new data suggests U.S. consumers will start getting stingier in the coming months. Any significant cutbacks will certainly weigh on tech firms that feed off discretionary spending, with a trickle-down effect likely felt by outfits doing commercial business.

The most concerning sign to date arrived Wednesday morning, when the Commerce Department released data showing the first slowdown in domestic retail sales this year. Spending on autos, electronics, and e-commerce all dropped, while spending on everyday essentials like groceries and gasoline rose.

“The figures suggest that Americans’ demand for merchandise is softening, which could reflect the impact of the fastest inflation in 40 years or greater preference to spend on services like travel and entertainment,” Bloomberg reported Wednesday. “As price pressures become more entrenched in the economy, spending will likely ebb either due to higher prices, higher interest rates, or both.”

Another grim indicator this week came in the form of lowered price targets on Apple, the world’s largest tech retail stalwart. While they remain bullish on Apple’s longer-term prospects, analysts at Deutsche Bank and Morgan Stanley trimmed their expectations for the company, citing concerns about sales.  

“Consumer spending intentions are turning more cautious, even for high-end consumer,” Morgan Stanley analyst Erik Woodring wrote in a note, per Barron’s

The pullback isn’t limited to the U.S., either. Bloomberg reported late Tuesday that China’s retail sales were down 7% year over year in May, as parts of the country reemerge from COVID lockdowns. MarketWatch also reported earlier this month that the eurozone’s retail sales fell 1.3% in April compared with March, a bigger-than-expected drop. 

The deteriorating outlook isn’t necessarily unexpected. 

According to FactSet data, S&P 500 companies in the “consumer discretionary” sector are now projected to report second-quarter earnings of about $32.9 billion, well below initial estimates of $40.7 billion made in early April. Nearly all companies in the “communication services” sector, including Google parent Alphabet and Facebook parent Meta, face less-optimistic second-quarter prospects now when compared with April’s forecast. While multiple factors contribute to the underwhelming outlook, including snarled supply chains and the war in Ukraine, slower consumer spending plays a key role.

Economists also warned that retail sales would slow in the coming months, as lower- and middle-income households grew increasingly skittish about draining their savings and accumulating debt to cover fast-rising costs.

The latest economic news suggests those forecasts are coming to fruition, ensuring that the era of tech austerity is here to stay.


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A billion-dollar boo-boo. A European Union appellate court ruled Wednesday that Qualcomm does not have to pay a $1.1 billion antitrust fine, finding that European regulators made procedural mistakes while prosecuting their case against the chipmaker. The European Commission, which brought the case, had accused Qualcomm of delivering payments to Apple that were intended to stop the iPad producer from switching to rival semiconductor companies. The EU’s General Court, the bloc’s second-highest judicial body, said the errors undercut Qualcomm’s right to defend itself and led to invalid conclusions by regulators. 

A safer system? A federal analysis of 400 crashes in which assisted-driving technology played a role found Tesla cars accounted for roughly two-thirds of the collisions, the Associated Press reported Wednesday. However, the National Highway Traffic Safety Administration warned against inferring that the data shows Tesla’s assisted-driving systems are less reliable than others, noting that the crash totals do not account for the number of vehicles on the road or miles driven. The NHTSA is collecting crash data to determine whether more regulations on assisted-driving vehicles are needed.

Batter’s out. Disney lost its bid Tuesday to acquire the streaming rights to India’s top cricket league, delivering a blow to the company’s subscriber targets for its Disney+ platform. The defeat could cause Disney to lose out on tens of millions of subscribers, though analysts noted that the cricket package could have been a net loss given that per-subscriber revenue from Indian customers is significantly lower compared with that in North America and Europe. In a separate deal announced Tuesday, Apple scored the streaming rights to Major League Soccer for at least $2.5 billion over 10 years, Sports Business Journal reported.

Big numbers for Shorts. Alphabet-owned YouTube disclosed Wednesday that monthly logged-in viewers of its video feature Shorts reached 1.5 billion, bringing it closer to rival TikTok, Bloomberg reported. The rare announcement of YouTube usage totals signaled confidence in the growth of Shorts, which started showing ads in some countries last month. YouTube is racing to compete in the short-form video space with ByteDance unit TikTok, which said it reached 1 billion global active users last September, and Meta-owned Facebook and Instagram.


Staying alive. As the world went increasingly mobile, HP would have been forgiven for fading into the night. But as Fortune’s Aman Kidwai wrote Wednesday, the personal-computing company remains alive and well under the leadership of CEO Enrique Lores. The Hewlett-Packard spinoff undoubtedly prospered during the pandemic, when students and companies needed computers while working from home. Yet HP also made some shrewd acquisitions and timely forays into new sectors, giving it additional breathing room ahead of an expected contraction in computer sales growth. A stamp of approval came in April, when Warren Buffett’s Berkshire Hathaway disclosed it had accumulated an 11% stake in the company.

From the article:

“We are not going to continue to grow almost 40% as we have grown during the last two years,” Lores says. But, he notes, “we think there’s going to be steady growth from a much higher point than where we were before.”

To keep the momentum going, Lores is steering the business into promising new markets like gaming and hybrid work, snapping up key assets through acquisitions, and rebuilding the HP brand by emphasizing things like sustainability and workforce diversity.


The Celsius meltdown during crypto’s “Black Monday” risks “contagion effect and cascading liquidations,” top analyst says. Does bankruptcy loom? by Taylor Locke

Ford recalls 2.9 million cars and SUVs which could roll when parked, by Chris Morris

“Working this out”: Major crypto hedge fund just gave a cryptic answer over whether it will implode, by Christiaan Hetzner

Elon Musk throws support behind Ron DeSantis for president in 2024 while revealing he just voted Republican for the first time, by Chris Morris

Elon Musk warns rivals Lucid and Rivian that unless they slash costs they’re going bankrupt, by Christiaan Hetzner

Twitter, Coinbase, and Redfin are rescinding job offers. It’s a short-term solution that can have long-term consequences, by Paige McGlauflin

How to raise venture capital for your startup regardless of market conditions, by Mike Ghaffary


Lost its edge. Digital years might not be equivalent to dog years, but it’s close. For that reason, here’s a hearty toast to Microsoft’s Internet Explorer, which heads to the tech trash heap after a remarkable 27 years in operation. Starting Wednesday, Microsoft will no longer provide support for the legacy internet browser, pushing customers instead to its next-generation Edge offering. While Internet Explorer died a slow death—its browser market share sits at 0.38% across all platforms, per StatCounter, down from a peak that exceeded 95%—it lived a long, prosperous life.

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