The Dow is down 400 points, a loss of 1.7%. Investors have, ostensibly, panicked because of the latest news from the Chinese negotiations. Tech stocks, even given the 400 point loss, have been hit disproportionately hard.
First, we can look at Intel (NYSE: INTC), which is down by a gentle 0.6%, has escaped suffering from a weak Q1 earnings report. Intel of course has also fallen less than the average today. The next tech losers include Apple, Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT), both down by 2.2%, and network-provider Cisco Systems, Inc. (NASDAQ: CSCO), down 3%. It’s obvious that the tariffs and the talks threaten supply lines — for example, Apple products and PCs almost always are processed through China, even for the tiniest steps of assembly.
Then there’s United Technologies Corp. (NYSE: UTX), which, in the course of breaking up its conglomerate into three companies, has lost 3.7%. It remains unclear how those hatchling companies — Otis, the famous elevator company, Carrier doing climate control and security, and a combined Collins Aerospace plus the engine-makers Pratt & Whitney — will perform financially. The breakup of the menage-a-trois has been long anticipated, but investors have still punished the stock by 3.8%, the second-worst performance.
The worst performance today is a 4% drop for International Business Machines Corp. (NYSE: IBM). Several factors are driving this.
1: IBM, like the countries above mentioned, has supply chains for their hardware running around the world. In fact, some of their software is also built on top of their hardware — i.e. the development of quantum or cloud computing.
2: IBM is an old company. For the last several years it has actually been shrinking is revenue. One hypothesis is that IBM missed the boat taken by the FAANGs, though it is working to catch up on AI. Further, many other companies are entering domains long-held by IBM,
3: IBM had poor quarterly earnings, falling below revenue targets and discouraging investors (this overlaps with decreased yearly revenue).
We will all see how tech is affected by the trade war, but for now the horizon looks dark.
A tangent — the S&P is more of a mixed bag. We’ve seen it ping-ponging in the 2800-2900 range this week. At the time of writing on Thursday, it’s fallen 1.5%. This past Tuesday, however, it had risen by 1%, making the overall weekly performance a wash. While it’s true that the S&P 500 has been falling through April and May, it’s still only back to its mid-March position, painting a happier picture.