Apple's Big Rally Gives Stock Bulls Something to Cheer About




  • In Business
  • 2022-08-12 20:23:48Z
  • By Bloomberg

(Bloomberg) -- For investors trying to decipher if the stock market rebound has staying power, Apple Inc. holds a clue.

Most Read from Bloomberg

  • Author Salman Rushdie Attacked on Lecture Stage in New York

  • Trump Calls for Release of Warrant Documents Used in Search

  • The Fed's Damage to the Housing Market May Last Years

  • Striking Drop in Stress Hormone Predicts Long Covid in Study

  • Putin's War Sends Russian Economy Back to 2018 in Single Quarter

The world's most valuable company has the biggest influence in the S&P 500 Index and its participation in the market-capitalization weighted benchmark is essential to any sustainable rally. Apple shares beat the S&P for a ninth-consecutive week and have helped fuel a 22% rebound in the tech-heavy Nasdaq 100 from a June low.

Apple is a so-called tent-pole stock that dominates investor attention and can help define investment narratives, according to Nicholas Colas, co-founder of research firm DataTrek. In that respect, he said, Apple's recent performance is "quite heartening."

The S&P 500 is still down 10% in 2022 despite rallying since June. Apple's shares, on the other hand, are on the cusp of turning positive for the year after tumbling with other technology stocks in the first half. Its shares have outperformed in both of the bull markets since the 2008 financial crisis.

In snapping up Apple shares, investors are betting that the iPhone maker's strong balance sheet will allow it to continue returning cash to shareholders and wring big profits out of its more than 1 billion users despite the potential for a recession in the US with the Federal Reserve bent on fighting soaring inflation.

"Apple is a safe haven that people flock to when uncertainty abounds in the rest of the market," said Daniel Morgan, senior portfolio manager at Synovus Trust. "Apple shares are driving the rally in the S&P 500 based on the durability of its model."

Like the broader market, risks to Apple's ascent abound. Inflation is weighing on consumers while China's stringent Covid-19 policies pose a lingering threat to its supply chains. While Apple has reportedly asked suppliers to maintain last year's pace of iPhone production, some of Apple's suppliers are sounding alarms over a pullback in demand.

Micron Technology Inc. this week warned that sales in the current quarter are expected to be weaker than it expected when the maker of memory chips gave its forecast less than six weeks ago. That followed disappointing revenue projections from Qualcomm Inc., Intel Corp. and Nvidia Corp.

The sobering news from chipmakers, however, didn't stop technology stocks from rallying this week after a US consumer price gauge came in lower-than-expected, a result widely interpreted as easing pressure on the Federal Reserve to continue aggressively hiking interest rates to tame inflation. The Nasdaq 100 advanced 2.7% with more interest rate sensitive stocks like cybersecurity company Zscaler Inc. jumping more than 10%.

For Apple, the rising stock price has put the shares back in expensive territory. It's now priced at 27 times profits projected over the next 12 months, compared with an average of 17 over the past decade. That's making investors like David Bahnsen, chief investment officer at the Bahnsen Group, wary of buying the stock at current levels.

"Apple is probably the safest of the FAANG plays, but it isn't an attractive entry point," he said, referring to the cohort of mega-cap technology companies.

(Updates share performance throughout.)

Most Read from Bloomberg Businessweek

  • The Work-From-Home Revolution Is Also a Trap for Women

  • Mark Zuckerberg's Sheryl Sandberg Replacement Has Long Been Meta's Top Fixer

  • Booming Beef Industry Has Urban Cowboys Lining Up to Buy Cattle in Uruguay

  • How Employers Benefit From Offering Unlimited Paid Time Off

  • Amazon's Roomba Deal Is Really About Mapping Your Home

©2022 Bloomberg L.P.

COMMENTS

More Related News

Harsh Weather May Delay Germany
Harsh Weather May Delay Germany's Plans For First LNG Terminals

(Bloomberg) -- Most Read from BloombergMusk Hails Release of Twitter Emails on Hunter Biden StoryLarry Summers Says Fed Will Need to Boost Rates More Than...

More China Cities Ease Curbs in Expansion of Covid Policy Shift
More China Cities Ease Curbs in Expansion of Covid Policy Shift

(Bloomberg) -- More Chinese provincial capitals relaxed Covid restrictions as authorities expand a policy shift toward reopening the economy after anti...

Geopolitical Rivalries Are Transforming the Contours of Trade
Geopolitical Rivalries Are Transforming the Contours of Trade
  • World
  • 2022-12-04 01:00:00Z

(Bloomberg) -- Reports of the death of globalization are looking greatly exaggerated.Most Read from BloombergLarry Summers Says Fed Will Need to Boost Rates ...

ECB
ECB's Chance to Guide Rate-Hike Views Won't Last Long: Eco Week

(Bloomberg) -- If European Central Bank President Christine Lagarde and her colleagues need to hone the guidance about their final interest-rate increase for...

Goldman Sachs Warns Traders Of Shrinking Bonus Pool Even As Trading Revenue Rises
Goldman Sachs Warns Traders Of Shrinking Bonus Pool Even As Trading Revenue Rises

Leading global investment bank Goldman Sachs Group Inc (NYSE: GS) recently announced a shrinking year-end bonus for traders, despite seeing its trading...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business