Apple Stock Was the Biggest Loser in the Dow. The Index Still Rose. - Barron's

Apple is one of the more-established tech names, but not even it could withstand inflation fears that roiled the tech and biotech sectors Tuesday.

Stocks ended mostly lower Tuesday, and technology names were hit hard. Fears of higher inflation is spooking tech investors.

The Dow Jones Industrial Average rose 19.80 points, or 0.06%, to close at 34,133.03 The S&P 500 fell 28.00 points, or 0.67%, to end at 4,164.66, and the Nasdaq Composite dropped 261.61 points, or 1.88%, to close at 13,633.50. The biggest gainer in the S&P 500 was research and advisory firm Gartner (ticker: IT), which saw shares rise 14.2% after beating earnings estimates.

One of the main reasons the Dow didn’t fall tremendously was because the index is mostly tilted towards value companies, the shares of which didn’t suffer significantly. In fact, 14 of the 30 stocks on the Dow rose, showing there were plenty of strong performers on the index.

Growth stocks, including tech and biotech sectors, took it on the chin. Apple (AAPL) and Microsoft (MSFT), which figure prominently in the Dow and S&P 500 as component stocks, fell 3.5% and 1.6%, respectively. In fact, Apple stock was the biggest loser in the Dow Tuesday. Moderna (MRNA), a maker of Covid-19 vaccines, saw shares dive 6.7%.

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And yet 43% of the S&P 500’s component stocks ended the day with gains, according to FactSet data, so the tech plunge was far uglier than the performance in the rest of the market. Blame inflation fears.

Manufacturing data out Monday showed that companies recently saw the largest increase in prices paid for production inputs since 2008—a harbinger of inflation—and that companies are passing costs along to customers. The fear is that the Federal Reserve could respond by raising interest rates sooner rather than later. While treasury yields didn’t rise Tuesday, investors are worried that bond yields will ultimately continue upward, which would make stocks less attractive relative to bonds.

Worries of inflation and the consequences socked shares of companies that are either not profitable or still on their way to their earnings prime. Higher yields erode the value of future cash flows, hurting tech and biotech companies that are still burdened with heavy research-and-development costs and relatively little or no sales coming in.

“The story is inflation and...what that means for equities,” wrote Dennis DeBusschere, head of portfolio strategy research at Evercore, in emailed remarks to the media.

Keep watching for signs of inflation to see if the Fed blinks.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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