While the S&P 500 and the Nasdaq Composite were rallying Thursday morning, the Dow Jones Industrial Average (^DJI 0.67%) was moving in the opposite direction. The Dow was down 0.4% at 11:50 a.m. EDT today, dragged lower by steep declines from its industrial, financial, and energy components.

Tech was a different story, with both Apple (AAPL 0.26%) and Microsoft (MSFT -2.05%) managing small gains. Apple announced its first budget iPhone in four years, and a report from the Department of Defense's watchdog found no evidence that Microsoft's Joint Enterprise Defense Infrastructure (JEDI) cloud win was suspect.

Apple reveals its budget iPhone

It's been four years since Apple announced the original iPhone SE, a budget model with a small form factor. Since the original SE was discontinued, iPhone users were left to choose between pricey new models and cheaper, older models. The iPhone 8, launched in 2017, became the default low-cost option.

The iPhone SE.

The iPhone SE. Image source: Apple.

The iPhone lineup was shaken up on Wednesday when the company announced the second-generation iPhone SE. The new phone features a 4.7-inch screen and the same A13 bionic chip that powers the larger iPhone 11. While the iPhone 11 starts at $699, the new iPhone SE is priced at $399. Customers can pre-order the phone on Friday, April 17, and it will be available for purchase on April 24.

Apple is launching this low-cost iPhone as the coronavirus pandemic roils supply chains and hurts consumer demand for pricey gadgets. With the U.S. likely in recession, and with millions filing for unemployment over the past few weeks, demand for smartphones may slump in the coming months.

The timing of the new iPhone SE could work out well for Apple. The phone gives users of older iPhones an upgrade path to the latest hardware for $300 less than the iPhone 11. This could spur upgrade activity and help offset weaker overall demand for smartphones.

Even with a truly budget iPhone available, Apple's results are going to be rough for at least a couple of quarters. The company pulled its guidance for the fiscal second quarter in February due to the pandemic, although at that point countries outside of China were largely unaffected. The situation has changed since then, with stay-at-home orders and other social-distancing measures crippling the U.S. economy.

Apple is scheduled to report its second-quarter results on April 30. It's unlikely the company will issue any guidance given the uncertainty surrounding the pandemic, but the report should still give investors an idea of how demand for Apple's gadgets is holding up.

Apple stock was up 0.6% by late Thursday morning. Shares of the tech giant are now down about 13% from their 52-week high.

Microsoft's JEDI win found to be fair

In March, the Department of Defense asked a federal court to give it 120 days to reconsider some aspects of its decision to award the JEDI cloud contract to Microsoft. The award, worth as much as $10 billion over 10 years, had been challenged by cloud leader Amazon.com (AMZN 0.34%).

While that development opened up the possibility of the contract being split by the two companies, Microsoft may now be in the clear. On Wednesday, the Defense Department's inspector general issued a 317-page report that found no evidence that the decision was affected by interference from President Trump. The report also concluded that awarding the contract to a single company was "consistent with applicable acquisition standards." There was one caveat to the findings: The inspector general said the probe was limited by the White House.

This may not be the end of the story, with Amazon likely to continue its legal challenge. But the chances that Amazon prevails are now lower following the report.

Shares of Microsoft were up 2.4% by late morning. The stock is now just 7.5% below its 52-week high.