Tech Stocks Got Crushed. Why the Dow Is On Fire.

Tech Stocks Got Crushed. Why the Dow Is On Fire.

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Michael George Haddad

The Dow Jones Industrial Average crushed the Nasdaq Tuesday, as investors bet that the U.S. economy will continue to boom.

The Dow Jones Industrial Average gained 0.59% on Tuesday, while the Nasdaq Composite fell 1.33%, a 1.92 percentage point difference. The last time that the difference between the Dow’s gain and the Nasdaq’s loss was so large was Dec. 16, 2021

The S&P 500 finished the day down 0.06%.

The Dow got a boost as value sectors outperformed growth. Energy has gained 3.5% and financials have advanced 2.6%, while tech has slumped 1.1%. That suggests investors are shifting toward stocks that will benefit from stronger economic growth from those that can do well no matter what the economy is doing.

And the shift is apparent within sectors as well. In autos, shares of Tesla (TSLA) fell 4.2%, while General Motors ( GM ) stock rose 7.5%, Toyota Motor (TM) American depositary receipts advanced 6.9%, and Ford Motor (F) stock climbed 12%. In tech, Apple (AAPL) stock declined 1.3%, while International Business Machines (IBM) shares gained 1.5%, and HP Inc . (HPQ) stock advanced 3.1%.

Helping to boost those value stocks Tuesday was manufacturing data that gave markets confidence in the economy. The Institute of Supply Chain Management’s Manufacturing Index may not have beaten estimates, reading 58.7 versus expectations of 60, but prices fell drastically, as supply-chain constraints appeared to have eased some. With companies seeing costs rise more slowly, they may raise prices more slowly, which means less inflation. That means the Federal Reserve may not raise interest rates as quickly as expected, which is good for economic growth.

The bond market is confirming the rosier outlook for the U.S. economy, too. The 10-year yield, up to 1.67%, is outperforming the two-year yield, which is down a tick to 0.77%, resulting in a “steeper” yield curve. That’s something that happens when investors expect growth to be faster than they had been expecting.

It’s a strange message for the market to be sending given that Covid cases crossed 1 million in the U.S. yesterday, setting a record, while the Fed still could raise interest rates in March. And it certainly goes against the consensus thinking right now. Leuthold Group’s Jim Paulsen notes that the U.S. economy is expected to grow at a 3.4% clip not including inflation, a number he thinks will be around 4.5%. “In our view, this recovery has an abnormally large number of ‘sustainable forces’ that are likely to keep the expansion healthy long after monetary and fiscal policies turn restrictive.”

Yes, the market is sending a message that contradicts the consensus is thinking. That just means it’s time to question the consensus, not the market.

Write to Ben Levisohn at

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