From Wednesday’s opening bell to Thursday’s close, Apple’s stock fell 6%, as Jared Blikre of Yahoo Finance noted in this space on Friday. It represented the largest consecutive decline in 10 months.
You may already be aware of the offender: It has been claimed that Chinese officials have asked government staff to quit using iPhones.
Given that Apple has a significant presence in China, it is not entirely surprising that this headline would cause the stock to decline. Who is to say that China won’t order the closure of Apple stores in order to make a point to the West? Because we don’t know, Apple’s stock has fallen.
Interesting though it may seem, the Nasdaq Composite, which is heavily weighted towards technology, has not seen selling pressure while Apple’s stock has. The Nasdaq is down just 1.9% during the past five trading days, compared to Apple’s roughly 6% decline.
Why? The 10-year yield has stopped rising sharply as it seems the Fed will hold off on raising rates at its meeting later this month, which is the brighter side of the tech trade.
Because of this, investors are reluctant to sell tech stocks, which often behave poorly when interest rates are rising.
“I think we went through a process of investors absorbing higher rates for longer at the end of last year and the first half of this year, and you saw a very aggressive reset of valuations and technology in the second half of 2022,” Goldman Sachs managing director Eric Sheridan told me at the Goldman Sachs Communnacopia and Tech Conference last week.
Sheridan continued, “Unless there is a chance that 5% rates, plus or below, are going to be the new normal, we think the reset has basically happened at this point. We’ll have to go through another value reset, maybe for a larger group, if we end up with higher rates than that. However, according to our house view, the likelihood of a recession is decreasing and the Fed is unlikely to raise interest rates in the near future during its upcoming meetings.
The desire to purchase well-known IT brands was evident during the Goldman conference. crowded conference rooms for speeches by AMD, Nvidia, and a great number of others. Nobody I spoke to mentioned the Apple/China risk as having a significant impact on their choice of tech equities.