Investors can thank the resilience of Apple’s share price for keeping the S&P 500 index out of correction territory (10% or more fall from the most recent peak) as factors such as the health of economies in China, Europe, rising US interest rates, rising cost pressures for more of American business, tightening labor markets and the looming mid-term elections in the US undermine confidence.
Asian markets rebounded from Tuesday’s sell down and so did markets in Europe last night.
The CSI 300 index comprised of Shanghai and Shenzhen companies ended 0.3% higher following on from a sharp 2.7% slump on Tuesday. That gain, however, still left the index down 20.8% for the year to date and still in bear territory. Hong Kong’s Hang Seng index fell 0.4% but the Tokyo Nikkei rose 0.4%.
But the Australian market shed 14 points as investors remain very wary of what will happen on Wall Street overnight Wednesday. Oil prices were still near two-month lows last night.
Tuesday’s volatile trading ended with the index down more than 7% from its September 20 high and it is now back to July levels, and looking to go lower.
But analysts point out that had Apple and its $US1 trillion valuation (making it the most weighted stock in the index, and also in the Dow) fallen more than the current 4.6% drop from its October 3 high, then the S&P 500 would be in correction territory.
The Apple share price is steady on where it was a month ago and down 4.6% (or just over $US9) from the all-time high close of $US232.07. Apple’s valuation remains over $US1 trillion at $US1.070 trillion.
By contrast, Amazon’s share price has corrected and is down 10% in the past month (and 13.5% from its peak in late September) and its market value has slid from just over $US1 trillion to $US872 billion.
That’s why Apple’s latest quarterly report a week today US time (Friday morning, November 2) will be of considerable importance to investor confidence and the immediate direction of Wall Street.
The importance of Apple’s earnings report will be more than the report later in the US session overnight (Sydney time) from Amazon and Alphabet (Google).
Reuters pointed out how weak the market is currently by noting that Tuesday on the New York Stock Exchange, saw 1,256 stocks hit 52-week lows, with just 21 establishing new highs.
While the S&P 500 has yet to correct by 10% or more 75% of its component stocks have fallen that much, or worse. Some are in bear territory – falls of 20% or more from the most recent peak.
Reuters said that as of Tuesday 353 S&P 500 stocks have fallen 10% or more from their 52-week highs and of those a worryingly large 179 stocks have fallen by 20%.
That is not an upbeat market full of confidence and believing in the stuff that Donald Trump and his chief economic adviser, Larry Kudlow regularly pump out about how wonderful the US stock market is.
The S&P 500 materials index has fared worse than others in the fall – its down 19% from its 52-week highs, with the utility index down just 5%.
An associated problem is that some US analysts now see the US economy is cooling as the sugar hit from Trump’s tax cuts fade and big dividends and share buybacks lose their potential to stimulate investor demand and share price growth.
Figures out on Friday are expected to show the third quarter US growth slowed to around 3.2% annually from the 4.2% rate seen in the second quarter.
The weakness in the sharemarkets could, if it intensifies, see the Fed slow the pace of rate rises next year. The 4th for this year is considered to be certain at the central bank’s December meeting, despite Trump’s silly attacks on chair Jay Powell.
Trump thinks that having appointed Powell, the Fed chair will dance to the President’s tune, but the Fed chair is independent of the administration.
