Tech stocks look strong, but here’s a sign the sector is actually under a lot of stress

Contrary to what Wall Street is saying, another advertising and marketing agency confirmed that the technology sector appears to be having a lot of trouble when it comes to discretionary spending on advertising and marketing.

Shares of Interpublic Group of Companies Inc.
IPG,
-0.45%
plunged 13.3% to close at $32.87 on Friday, enough to lead the S&P 500 index’s
SPX,
+0.99%
losers, after the company missed second-quarter revenue expectations and cut its full-year growth outlook in half, citing weakness in the technology sector. The stock suffered the biggest one-day selloff since it tumbled 15.3% on March 12, 2020.

That comes just two days after fellow ad agency Omnicom Group Inc.’s stock
OMC,
+0.26%
tumbled 10.4% to pace the S&P 500’s decliners, after also missing on revenue and providing a somewhat downbeat outlook, amid a “pause” in tech-sector spending as clients have become “more cautious.”

And the companies also said they saw softness from tech-sector clients in their first-quarter reports.

That might seem counterintuitive to investors, given that the technology sector has been the S&P 500’s strongest this year. The Technology Select Sector SPDR exchange-traded fund
XLK,
+1.36%
has soared 41.5% year to date, while the S&P 500 index
SPX,
+0.99%
has advanced 18.2%.

Interpublic Chief Executive Philippe Krakowsky said Friday on a post-earnings call with analysts that the tech sector is moving through a “challenging period” that has included significant cost and workforce cuts.

“[W]hat we have seen is that the sector is under a lot of stress,” Krakowsky said, according to an AlphaSense transcript.

He said the pressure Interpublic has seen in sector isn’t from smaller tech companies, or those backed by venture capitalists, but a “relatively small group of large companies.”

And given a “modestly more uncertain” macroeconomic environment, Krakowsky said it’s clear that pressure on the tech

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