taylor: let's look how equities performed on the day, not the worst of the worst but not the best of the best. technology continues to be in focus with yields continuing to rise and putting pressure on some of those long-duration assets. the nasdaq up 2.3% on the day, one of the worst performers along with the stock index. we are going back to the lowest since last may. it's all about the big draw down. we heard from microsoft, now up 16% from its peak. the nasdaq still off 15% from its latest peak.

the drawdown in technology continues. that was the markets wrap. "what'd you miss?" starts now. ♪ caroline: i'm caroline hyde and this time the massive come back in stocks is short-lived. u.s. trading this afternoon saw a slight peak into the s&p 500, before retreating into the close. today triple take, ahead of the decision tomorrow, looking at earnings, tech, overall trend as investors remained skittish. micro soft is the bellwether. romaine: definitely. but does it matter? they were ahead across the board on profitability at each of the sector levels with regards to their individual business units?

microsoft and i.t. spending overall, you would think this would be positive, shares are down 4%. the second-biggest waiting in the s&p 500, this could have a big impact on the markets. most of the other software stocks, particularly tied to the cloud, amazon web services and smaller ones like f5. taylor: one of the big ones, microsoft, let's bring in our senior software and i.t. services analyst anurag rana. i'm distracted because i'm reading some of the analyst notes across the wire, saying it was not a good enough corridor, and it may be slightly missed the whisper numbers of 48%. how is this not good enough? anurag: it is surprising to us and is something we talked about earlier. over the last eight quarters, microsoft has been revenue of about 400 basis points.

it was between 250 and 300. it is confusing to me. i don't see why a company that is growing at 15 or 20% is not something that investors would like in a market where there's not much growth out there. caroline: to that point, you have been signaling, analysts have been signaling we are likely to see comps, we will are -- we will see a slowdown. you're getting a 40 or -- 40 instead of 50% growth, but the same revenue. anurag: people are shooting first and thinking later which does not bode well for amazon or apple in the next few days. if this is not good enough for investors i don't know what would be. we look at a stock like microsoft that is revenue a double digits, earnings in double digits, if that is not

enough i'm amazed. romaine: i'm going through our earnings function and their consecutive beats this company has put up with regards to revenue and profitability, it goes back more than 15 quarters. it has a pretty good track record. we are getting some headlines crossing the wire. this from the microsoft cfo saying there will not be any new comments about the activision deal. you did talk about the xbox supply better than expected. when it comes to the challenges the company faces outside of its cloud business with regards to gaining in xbox or with the pc business, what did you see in this report that gives you encouragement? anurg oa -- anurag: overall responsiveness across the board. last year we saw a massive upgrade cycle at home because people working from home. we expect the next 12 months to

be different. gaming has been strong, one area where they will run into to obstacles. airing the pandemic it was a blockbuster segment for them and you can't replicate those level of growth numbers going forward. romaine: always appreciate you jumping on on us, bloomberg intelligence senior analyst helping us break down those microsoft numbers. this could have a potentially big impact on the market. we are coming off two wild days of the market. let's bring in katie grayfield -- katie wright felt -- katie and another to talk about not what we should expect but whether we should expect this. katie: it is a tough question and as you were just talking, there is a lot of growth in these things, especially for tech stocks where a lot of the pain we have seen this year is a

toxic combination. you have a super high bar for earnings, exposure dutch a federal reserve going to tighten policy -- a federal reserve that is going to tighten policy for the first time in a long time. without that you are seeing most of this pain in the tech sector which we know is richly valued at that point, it showcases again this is mostly about valuations at this point. taylor: you talk about fundamentals in pulling microsoft. they look good in the quarterly report. how do you think about valuations on long-duration assets with yields rising? is that what is being considered here? >> when i look at any evidence i can find -- we have data going

back 140 years. there have been all kinds of combinations of high interest rates and high valuations, who interest rates and low valuations and everything in the middle. i think focusing on interest rates is the wrong place to go. the place to look is at the evaluation gaps between technology, and i would say large-cap ruth -- growth in the u.s. a general, and every thing else. we compare the value to small caps, international, emerging, any equity asset class you can think of, you are struck by the evaluation cap at or near record levels. when you pointed out to people, they say yes, but these are highly profitable companies. it is true to some extent, but they are not all highly preferable to -- profitable. the electric carmakers are not. and companies do not stay highly profitable forever. they are to a large extent as volatile as stock prices. it explains why these valuation

gaps go up and down. the only question is are we seeing the beginning of it now? meme stocks, that could be the canary in the coal mine and i would point out one more thing. when you look at the declines recently, it has been in the places with the highest valuations and lowest quality, lowest profitability. that's usually where it starts but we will see where it goes. caroline: to that point, russell 2000 almost in a bear market. it's not as if everyone is going valuations are in small caps, but they are settling everything. it's what i don't understand. katie: it has been interesting to watch small caps especially at the start of this year. they are not playing along with this rise in yields at all. that was the story at the start of last year, you saw the amazing small caps rally because

you had yields moving higher, economic optimism that should be good for small caps. and it goes to his point that those unprofitable companies are different story, it is not the high-growth names in the ark innovation etf for example. they don't have that pristine balance sheets you might find in the -- might find. the russell 2000 and though small caps are under pressure. romaine: do we need pristine balance sheets in this environment? even if they do tighten at the aggressive pace some people are pricing into the market, it leaves us at 2% at worst. nir: i don't know if it is so much about balance sheets. that is always a factor but i think it's about profitability. now when you look at they small caps space, there is a lot of junk in there and not just in large caps. there is a huge difference and a lot of companies particularly in the small growth area, if you

look at them from a quality perspective, a balance sheet to a lesser extent, profitability to a greater one, i can imagine a scenario where you get a valuation type connection that knocks out growth across the board. when you look at the most expensive corners of the global stock market, what you notice is that it is growth and quality. it is large, mid and small. if i don't think small growth is going to be spared if this is a real correction. taylor: a few days does not a trend make. maybe three days is a trend. nir, how are you thinking about the traditional way, at least in the last year, that week thought about big tech as a safe haven? apple, 100 $90 billion in cash on the balance sheet. microsoft $130 billion of cash on the balance sheet. how are we thinking about big

tech and these companies as the safe havens? nir: i daresay i think investors are starting to rethink that. ultimately, yes it comes down to balance sheets, yes, profits. it also comes down to valuation. i would argue nothing is safe at a high enough valuation and investors will eventually look at that and say i do not know if we are comfortable with this. it may no longer be safe haven we consider a year or two years ago. the question is going to be whether there is contagion. you can imagine the scenario where investors rethink valuation there and everything else gets hammered. you can also a replay of the late 90's and 2000's, it's early days so we cannot judge based on the last several weeks, as this goes on, if it goes on, you have a big spread in the performance in tech and large growth wears everything else is cheaper.

i can imagine that scenario. it is too early to know what we will get, but if you have been avoiding the frothy segments of the market, hopefully you will be rewarded by taking less steep declines or gains. caroline: looking at what is getting, energy up 4% on the day, financials up .5%. is that the only game in town? are you having to go front and center value at the moment? katie: it is hard to know. it is nice that energy and banks held on today. it makes sense that we have come to rely on -- most of the investors i've talked to say they need more clarity from the fed. hopefully we get it tomorrow on their tightening plans. there is a lot priced into the market right now. it's interesting that even with what we have seen in the technology sector, this has not budged.

but when i talk about the long-term plans, people say stay invested. but a lot of this depends on how aggressively this moves. your hearing a lot of talk about maybe you have to move faster. romaine: i'm looking at nasdaq futures, down about 3.6%. s&p minis down. these are big than what we have seen in the pre-post market. most of the most severe declines were during those sessions. how much do you read into these pre-and post market moves and how that may flee desk -- may play into that? katie: it is amazing to watch these post market moves. i was checking my phone last night and futures were down, i said that is nice and i looked up and we had carried further into the u.s. open. romaine: did you tweet that? katie: i did. i tweet constantly. i think it ties in with how much

trading we are seeing, how much is the u.s. market open? not enough. caroline: bitcoin up .7%. thank you, katie greifeld. meanwhile, we will be digging more into the earnings impact, microsoft earnings, digging into the tech sector selloff. romaine: are we going ot head -- to head there? caroline: i hope. this is bloomberg. ♪

romaine: today's will take, looking at wild swings in the equity markets. the tech sector receiving the most selling pressure and now you're looking at the nasdaq futures, down about 3.8% after we got micro soft earnings and earnings of a couple of other companies in the tech space, putting downward pressure on the markets. jeremy brian, a portfolio manager at gradient investments. we appreciate you being with us. i want to start broader here. we got microsoft. there is no way to parse that, it is a beat. but expectations in this market appear to be disconnected from maybe where we were a few months ago. >> yeah. there seems to be natural selling pressure. i don't know how you get around

that. they have slow down a little, but 46% year-over-year, many people would complain about that in a normal environment. it is indicative of the overall market trying to find its footing. that's what you're seeing. wild swings, premarket and post market being volatile, markets trying to find a stabilization point. i don't think we're there yet. as we digest more and more earnings, we may start to reach that stabilization point. numbers like this give me more confidence longer-term that things are looking good. caroline: dipped by -- potenti ally -- apple is a company everyone will be looking to. how much do they have to beat or sustain their growth to not get beaten up in terms of valuation perspective when the nasdaq 100 has fallen from 30 to 25 times?

jeremy: is a phenomenal question. you have seen a classic beat. this was not much different than microsoft has done in the past. there's not an acceleration of the beat. i don't think the story is written yet. as you can see, you can be down 4% and up to percent at the end. there differentials. i think apple is going to be in that, what do numbers look like from a services perspective especially, are we continuing to buy things there? what does gross margins look like? gross margins across the landscape are important to companies. what we need to figure out is where we are going from a valuation perspective. i heard your last guest say it, we are getting cheaper by the day because i don't numbers are going to come down on these companies. so the -- if the stocks are going to do that, i think

earnings estimates will go up for most of these companies. taylor: wondering if this is a broader concern or discussion about the heavy waiting -- weightings in these companies portfolios, and not only the ability to drag this down, but thinking about your portfolio and the impact it has on the broader market. jeremy: i think that is critical. we have owned microsoft, apple, but we have been underweight. it is some play their size. their size perspectives make them abnormally large for the performance of the index and we chose to diversify into other areas. we select these companies, but do we want seven, eight, 9% of them? no. we had to be somewhat underway. if other things start to participate and we get better upsides from the other ones, small caps were mentioned before

but mid to large caps even, not your trillion dollars companies but your multibillion-dollar companies, if they can have a -- they really do drive the markets and for us we feel more comfortable diversifying across the landscape more rather than concentrating to the companies. if you add google to those three, it's different. romaine: in terms of the amount of oxygen they are taking up in the economy, apple, microsoft, amazon, tesla you could throw in, companies that for better or worse are transforming the way we shop, do business, look at the world. is there any reason to think that any of those companies would be brought down to size by anything external? jeremy: the only when i would

counter you on his tesla. from an apple and microsoft perspective, you are right. microsoft is going to do $200 billion in revenue this year. they are growing from an earnings perspective. you don't see that. the scarcity value is crazy. from a total addressable market perspective in our percent of the market, if you think about tesla, it is not a large component of the overall auto industry. from a market cap perspective it is, but from a units sold perspective, it is not as big as these other guys. no one -- that could actually come down to quote unquote size and not affect the industry. it would be a sentiment driven decline in the stock, saying the competitors have caught up or something like that. they do not swallow a ton of oxygen from the consumer perspective in using them as part of the overall pie of the

industry. taylor: jeremy bryan, really appreciate your time and thoughts. he mentioned tesla who we will hear from tomorrow. final thoughts are next. stick with us. this is bloomberg. ♪

romaine: if you can believe we are only two days into the week and we have had two wild days. looking at nasdaq futures, down almost 4% after microsoft earnings. caroline: a phenomenal move, you will say we have not seen these drop-offs in the futures market since the pandemic real selloff. taylor: a phenomenal is the marg the fed or trying to figure out what the fed is going to do? we talked about what powell did. is it a lot lower? romaine: yeah, someone talked about where that has been

traditionally and it was more than 20% threshold. we are nowhere near that, 9% on the nasdaq right now. caroline: if we get to 16 or 18%, that is when he five. -- 25 . that's what you'd missed -- would you miss -- "what'd you miss?".

♪ >> from the heart of where innovation, money and power collide, in silicon valley and beyond, this is "bloomberg technology," with emily chang. ♪ emily: i am emily chang in san francisco and this is "bloomberg technology." microsoft slowing crowd -- cloud growth as investors overlook the strong second-quarter report.