Dow Jones Sheds 129 Points as Tech Leaders, Nasdaq Surge

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The Dow Jones Industrial Average gave up 129 points, but it could have been a lot worse with the Dow falling as much as 600 points at one point earlier today. There didn’t seem to be anything new driving stocks lower, but investors continue to worry about a looming recession, which experts and analysts have been warning about for several months now.

During the day, yields on the 2-year and 10-year U.S. Treasury bills inverted, which has historically acted as a warning that the economy will fall or has already fallen into a recession. 

“There’s something afoot in investor sentiment that is difficult to ignore, given the inversion is occurring with 10-year yields below 3%,” said Ian Lyngen of Bank of Montreal, according to CNBC. “I wouldn’t say it’s a direct indication that a recession is a near-term risk. Rather it’s consistent with increased concern about recession.”

Despite these growing concerns of recession, tech stocks actually fared well today. The Nasdaq Composite finished the day 1.75% higher. That same trend could be seen in the Dow as well, with three prominent tech stocks saving the Dow from plunging lower.

Chinese tariffs

Although Nike (NKE 1.76%) finished at the top of the Dow today, large tech stocks were among the top finishers. Cloud giant Salesforce (CRM 4.97%) finished the day nearly 2.4% higher, shares of Apple (AAPL 1.35%) rose nearly 1.9%, and shares of Microsoft (MSFT 1.06%) finished nearly 1.3% higher.

Large tech stocks seemed to respond favorably to news that President Joe Biden is considering easing tariffs on China first imposed by former President Donald Trump back in 2018.

Biden is considering the move to try and level off inflation, which has hit a 40-year high this year. Economists say the removal of Chinese tariffs could bring down the Consumer Price Index (CPI) — a measure of daily consumer goods and services — by roughly 0.3%.

Now, that’s not exactly a ton when the CPI rose 8.6% in May from one year prior. But rolling back tariffs could have broader implications for the larger tech stocks when you consider prevailing supply chain issues that started with the pandemic and large tech’s reliance on China. 

Earlier today, Morgan Stanley analyst Katy Huberty noted that app store revenue growth likely slowed in the month of June, largely due to slowing download trends in China. Huberty said China revenue could be down 6% on a year-over-year basis after showing growth in May.

While download trends may not be directly tied to Chinese tariffs, large tech stocks have a lot to gain from easier trade relations and a healthy economy in China.

Buy large-cap tech stocks?

After a brutal sell-off this year, I definitely think there are opportunities in stocks like Apple, Microsoft, and Salesforce. These large and well-established brands can pass higher costs onto their consumers and are starting to prove more inflation-resistant as the world continues to become more digitized.

Overall, a recession is certainly not great for the economy. However, investors’ concerns over recession are actually the reason that U.S. treasury yields stumbled today, which is typically positive for tech stocks

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nike, and Salesforce, Inc. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.