Why Are Stocks Down Today? The Dow Is Crushing the Nasdaq.

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

The Dow Jones Industrial Average has gained 0.55% on Tuesday, while the

Nasdaq Composite has fallen 1.8%. The last time that the difference between the Dow’s gain and the Nasdaq’s loss was so large was March 8, 2021. The

S&P 500
was down 0.3%.

Value sectors are also outperforming growth. Energy has gained 3.5% and financials have advanced 2.6%, while tech has slumped 1.6%. 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) have fallen 4.8%, while

General Motors (

GM) stock has risen 7.3%, Toyota Motor (TM) American depositary receipts have advanced 6.9%, and

Ford Motor (F) stock has climbed 11.8%. In tech,

Apple (AAPL) stock has declined 1.4%, while

International Business Machines (IBM) shares have gained 1.9%, and

HP Inc. (HPQ) stock has gained 3.1%.

Helping to boost those value stocks Tuesday was manufacturing data that gave markets confidence in the economy. The Institute for 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.

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 [email protected]