Some anxiety surfaces on Apple

While the Dow Jones Industrials managed a 10-point or 0.1% rise, the S&P 500 (-0.1%) and NASDAQ (-0.6%) were lower Wednesday, due chiefly to a 4% decline in Apple shares. Apple’s decline may have been the result of simple profit taking; or perhaps it reflected anxiety on next week’s anticipated launch of the iPhone 6; or perhaps it was the failure of an arcane, second order technical indicator. In any event, Apple’s fall today subtracted around $25 billion from the stock’s market capitalization and accounted for roughly half of the NASDAQ Composite’s 0.6% decline for the day.

Apple also peeled away some of the profits from the S&P 500 technology sector, which had been one of the leading market sectors at the eight-month mark this year. Although there were 41 gainers in the tech sector today against only 24 losers, Apple’s fall contributed to the sector’s 0.7% decline on the day, easily the worst showing among the S&P 500’s 10 market sectors. Health care stocks (+0.4%) and utilities (+0.6%) led the S&P today. Mid- and small-cap stocks indexes tended to be weaker, with poorer market breadth, than most big-cap indexes.

Foreign stocks got a boost Wednesday from indications that Russia and Ukraine were close to a cease-fire agreement for eastern Ukraine. For one day at least, geopolitical tensions seemed to recede, setting the stage for gains on the order of 1% in Europe’s major bourses Wednesday. Green was also the color of the day in Asia, as the Asia Dow index rose 1.1%. Notably, Hong Kong bounced 2.3% higher on the Hang Seng index, and Shanghai rose roughly 1%, while India and Japan were up roughly half as much. The euro and yen were little changed vis-a-vis the dollar. Energy futures prices gained sharply, recouping a lot of Tuesday’s declines.

The Fed’s beige book report on economic conditions in the 12 Federal Reserve districts showed continued growth over the mid-July to late August period. All Fed districts reported either modest or moderate growth. Auto sales figures reported today equated to a seasonally adjusted annual selling rate of 17.45 million, highest since 2006. July’s pullback in car sales – and consumer spending generally – apparently did not last long. Along with yesterday’s stronger than expected data on construction in July, today’s car sales stand to support or more likely boost the Atlanta Federal Reserve Bank’s GDPNow forecast of 3.2% GDP growth for Q3 2014.

Despite strong indications on U.S. economic growth, disappointing readings in Europe’s service economies sent Treasury bond yields lower on Wednesday. Investors appear to regard even one day’s move to higher yields as reason to be buyers of bonds; the 10-year Treasury note yield dropped to 2.40% by the close from a high of 2.46% earlier in today’s session. European bond yields were flat to higher on the day.

Reports/dates/facts/links to watch for over the next week:

  1. September 4: ADP national employment report (August): ISM non-manufacturing purchasing managers’ survey (August); weekly unemployment claims.
  2. September 5: Labor Department report on unemployment and payrolls (August).
  3. September 9: U.S. JOLTS Job Openings report (July); same store sales latest week.
  4. September 10: U.S. wholesale trade (July)
  5. September 11: U.S. weekly jobless claims; U.S. Treasury monthly statement (August).

Copyright © 2014 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

About wrightnetblogger

Senior Vice President – Investment Research/Economist
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