Amazing how one tiny headline could destroy the shares of tech titan Apple (AAPL).
As Yahoo Finance’s Jared Blikre wrote on Friday, Apple shares fell 6% from Wednesday’s opening bell to Thursday’s close. It was the biggest consecutive decline in ten months.
The culprit as you may know by now: Chinese officials are reportedly asking government employees to stop using iPhones.
Considering Apple does big business in China, it’s not a total shock that this headline would take a bite out of the stock. Who says China won’t order Apple store closures to send a message to the West? We don’t know, and that’s why Apple stock has been hit.
But interestingly, while Apple shares have come under selling pressure, the broader tech-heavy Nasdaq Composite has not. Over the last five trading sessions, the Nasdaq is down just 1.9% compared to Apple’s decline of nearly 6%.
Why? It’s the brighter side of tech trading, in that the 10-year yield has halted its meteoric rise as it looks like the Fed will pause on rate hikes at its meeting later this month.
That’s making investors lukewarm about dumping tech names, which typically don’t perform well when rates rise.
“I think we went through a process at the end of last year and the first half of this year where investors have absorbed higher interest rates for longer, and you’ve seen a very aggressive reset in valuations and technology in the second half of 2022,” Goldman says Sachs. Managing Director Eric Sheridan explained it to me last week at the Goldman Sachs Communacopia and Tech Conference.
Sheridan added: “We think the reset has largely taken place at this point, unless there’s a chance that 5% interest rates, plus or minus, are going to be the new normal. If we end up with higher rates than that, we will will have to undergo another valuation reset, likely for the broader group. But in our view… the likelihood of a recession would decrease and the Fed is unlikely to raise rates anytime soon over the next few meetings.”
I certainly saw the hunger to own top tech names at the Goldman conference. Packed meeting rooms for presentations from Nvidia, AMD and countless others. Not a single person I spoke to mentioned the Apple/China risk because it weighs heavily on their decision-making process on technology stocks.
What they did mention was – in Sheridan’s sense – a cooldown in interest rates that opened up some gateways to fundamentally strong names.
So not to ignore the buzzy Apple/China news, but there is a brighter side to technology – as is often the case in life.
Brian Sozzi is editor-in-chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email [email protected].
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