What happened
It was another negative day for tech stocks today as investors began to worry again that the Federal Reserve's interest rate hikes could end up tipping the U.S. economy into a recession.
Those fears sent stocks lower yesterday and the pessimism continued into today after Morgan Stanley said that it's laying off 2% of its workforce and JPMorgan Chase's CEO said that inflation could end up causing a recession.
As a result, the S&P 500 shed 1.8% and the tech-heavy Nasdaq Composite fell 2.3%. All of this pushed Apple (AAPL -0.22%) down by 2.7%, caused Salesforce (CRM -2.21%) to initially drop by than 2.2% today before regaining some of its losses by mid-afternoon, and made Qualcomm's (QCOM -0.83%) stock slide 3% as of 3:08 p.m. ET.
So what
Last week investors had been cautiously optimistic that the Fed wouldn't accidentally spur a recession after Federal Reserve Chairman Jerome Powell said, "...it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down."
Image source: Getty Images.
Powell added, "The time for moderating the pace of rate increases may come as soon as the December meeting."
That boosted sentiment in the market temporarily, but over the past couple of days, investors began 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 that it may be "somewhat higher" than initially thought.
The Fed is meeting next week to decide how much to raise to raise interest rates again. Most economists are expecting a 50-basis-point increase.
A higher terminal rate spooked investors over the past couple of days and those fears were heightened after Morgan Stanley said it will cut about 2% of its workforce today, equal to about 1,600 jobs.
Additionally, investors were processing comments from JPMorgan Chase's CEO Jamie Dimon, who thinks that inflation and rising interest rates will push the economy into a recession next year.
Apple, Salesforce, and Qualcomm investors are likely reacting to all of this news today because any prolonged slowdown in the economy would cause pressure on their businesses.
Apple is already grappling with supply chain issues with some of its iPhone manufacturing in China due to strict zero-COVID policies.
And Salesforce's stock has been reeling after the company announced last week that its co-CEO is stepping down and after Slack's CEO said yesterday that he's leaving his position. Slack was purchased by Salesforce last year.
Additionally, Qualcomm investors have been trying to gauge where the company is headed after it reported fiscal fourth-quarter results last month that were mostly in line with expectations, but management issued first-quarter guidance that disappointed investors.
Now what
While it's not surprising to see Apple, Salesforce, and Qualcomm falling on recession fears today, it's worth mentioning that these stocks will likely have to weather some additional volatility as investors try to figure out what's happening with the economy.
What investors shouldn't be doing right now is panic-selling. Instead, one proactive measure you can take right now is to revisit your initial reasons for buying Apple, Salesforce, and Qualcomm and see if the investment thesis is still intact.
It can be easy to follow the investing crowd at the moment, but taking some time to step back and evaluate your investment strategy should give some much-needed clarity.
