What happened
Shares of Apple (AAPL 3.40%) declined today, falling as much as 2.1% in early trading before moderating those losses to a 1.3% decline as of 1:43 p.m. ET. While not a tremendous decline, it was notably weaker performance than the market overall as well as the tech-heavy Nasdaq Composite, which were both positive on the day at that time.
Today's weakness could be attributed to some "selling the news" by traders following yesterday's event, in which Apple unveiled new iPhones, watches, and services, with more incremental innovation than any great leaps forward. Additionally, it appears most large-cap tech stocks of the FAANG cohort were underperforming today, with other lower-valued parts of tech such as semiconductors outperforming, so there may be some rotation going on here.
NASDAQ: AAPL
Key Data Points
So what
Yesterday, Apple unveiled a slew of updates to its product portfolio, mostly centering on incremental health and emergency features for the new iPhone 14, as well as improved battery and camera specs. The biggest surprise may have been that Apple wasn't raising prices on the iPhone 14, perhaps making a play for more market share in order to boost future services revenue. The most "new" product was a $799 Apple Watch Ultra, designed for extreme athletes. However, that is a relatively limited market.
So, there may have been some selling from traders who were hoping for a more "revolutionary" release. However, since other large-cap tech stocks were down today, there could also be some market rotation going on.
This morning, weekly jobless claims came in below expectations, which means the labor market is still incredibly strong despite Federal Reserve's interest rate hikes. The strength of the labor market seems to indicate the Federal Reserve can perhaps raise rates more than thought without tipping the economy into recession. This morning, Fed Chair Jay Powell gave an interview in which he said he believed the Fed could bring inflation down without the severe social costs seen in the 1980s, when inflation was more entrenched.
Apple, trading at more than 25 times earnings, has become somewhat of a safe-haven stock in the technology world. However, Powell's remarks may have led some to believe higher interest rates may not lead to a severe recession as some have feared.
Meanwhile, the recent market downturn has really decimated other corners of the tech market, especially quasi-cyclical stocks like semiconductors and formerly high-flying software companies. So, some traders may be selling the large-cap safe havens and buying these other parts of the technology market that have become cheap, assuming no recession.
Now what
While today's underperformance is notable, one day doesn't make much difference over the long term, and there are no big worries with Apple at the moment. This Warren Buffett favorite has a tremendously wide moat, tons of cash, and terrific leadership. Meanwhile, the absence of iPhone price hikes this year could lead Apple to gain even more market share against Android-based devices.
While the upside may not be as great as some other more beaten-down, smaller technology stocks, Apple remains a rock-solid company to anchor your portfolio.
