Tech Stocks Are Getting Crushed. Why the Dow Is On Fire.

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Michael George Haddad

The Dow Jones Industrial Average is on pace to outperform the Nasdaq Composite by the most in more than nine months as investors bet that the U.S. economy will continue to boom.

The Dow Jones Industrial Average has gained 0.72% on Tuesday, while the Nasdaq Composite has fallen 1.73%. That 2.45 percentage point gap is the largest since March 18, 2021, when the Dow dipped 0.46% and the Nasdaq fell 3.02%. The S&P 500 is little changed.

Value sectors are also outperforming growth. Energy has gained 3.1% and financials have advanced 2.7%, while tech has slumped 1.5%. That suggests that 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, Tesla (TSLA) has fallen 4.7%, while General Motors (GM) has risen 5.3%, Toyota Motor (TM) has advanced 5.1%, and Ford Motor (F) has climbed 9.6%. In tech, Apple (AAPL) has declined 1.2%, has slumped 2.1%, while International Business Machines (IBM) has gained 2.4% and HP Inc . (HPQ) has gained 3.2%.

A quick look at the bond market confirms a rosier outlook for the U.S. economy. The 10-year yield, up 0.052 percentage point to 1.682%, is outperforming the two year, which is down 0.02 percentage point to 0.766, 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 yesterday, setting a record, while the Fed is more likely than not to raise interest rates in March. And it certainly goes against the consensus thinking right now.

But when the market is sending a message that contradicts what the consensus is thinking, it’s time to question the consensus, not the market.

Write to Ben Levisohn at