What happened
It was another negative day for tech stocks today as investors began to fear again that the Federal Reserve’s interest rate hikes could eventually tip the US economy into a recession.
Those fears sent stocks tumbling yesterday and the pessimism continued today after Morgan Stanley says it is laying off 2% of its workforce and JPMorgan ChaseThe CEO of said inflation could end up causing a recession.
Consequently, the S&P500 losing 1.8% and heavy tech Nasdaq Compound down 2.3%. All this prompted Apple (AAPL -2.53%) down 2.7%, due to Selling power (RCMP -0.53%) initially falling more than 2.2% today before regaining some of its losses by mid-afternoon, and Qualcommit is (QCOM -2.93%) shares slip 3% at 3:08 p.m. ET.
So what
Last week, investors had shown cautious optimism that the Fed would not accidentally trigger a recession after Federal Reserve Chairman Jerome Powell said: “…it makes sense to moderate the pace of our rate hikes as we approach the level of restraint that will be sufficient to bring inflation down.”
Image source: Getty Images.
Powell added, “The time to moderate the pace of rate increases may come as early as the December meeting.”
This temporarily boosted sentiment in the market, but over the past two days investors have started to process the rest of Powell’s comments. Specifically, the Fed may need to raise the “terminal rate” – the peak at which the Fed stops raising rates – and Powell said it may be “a little higher” than previously thought. initially.
The Fed is meeting next week to decide how much to raise to raise interest rates again. Most economists expect a 50 basis point increase.
A higher terminal rate has spooked investors over the past two days and those fears were heightened after Morgan Stanley said it would cut about 2% of its workforce today, or about 1,600 jobs.
Additionally, investors were processing comments from JPMorgan Chase CEO Jamie Dimon who believes inflation and rising interest rates will push the economy into a recession next year.
Investors in Apple, Salesforce and Qualcomm are likely reacting to all this news today, as any prolonged downturn in the economy would put pressure on their businesses.
Apple is already struggling with supply chain issues with some of its iPhone manufacturing in China due to strict zero COVID policies.
And Salesforce shares have been rocked after the company announced last week that its co-CEO was stepping down and after Slack’s CEO yesterday said he was stepping down. Slack was bought by Salesforce last year.
Additionally, Qualcomm investors have been trying to figure out where the company is headed after it released fiscal fourth-quarter results last month that were mostly in line with expectations, but management released first-quarter guidance that disappointed investors.
Now what
While it’s no surprise to see Apple, Salesforce and Qualcomm crumble on recession fears today, it’s worth mentioning that these stocks will likely face additional volatility as investors try to figure out what’s going on. what’s going on with the economy.
What investors should not do right now is panic sell. Instead, a proactive step you can take now is to revisit your original reasons for buying Apple, Salesforce and Qualcomm and see if the investment thesis is still intact.
It can be easy to keep up with the crowd of investors right now, but taking some time to step back and assess your investment strategy should provide much-needed clarity.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger holds positions at Apple. The Motley Fool holds positions and recommends Apple, JPMorgan Chase, Qualcomm and Salesforce. The Motley Fool recommends the following options: $120 long calls in March 2023 on Apple and short calls $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.
