JP Morgan Portrait Done near the turn of the century, 1900 that is.
It’s not just Apple that is down, the whole market is sharing the pain. This morning there were two big catalysts that initiated this selloff, I had warned about one of them in today’s pre-market alert to subscribers, and that was the Consumer Sentiment survey. It reported well below expectations. The other catalyst was comments made by the head of the United States’ second largest bank, JP Morgan during their earnings disclosure this morning.
So how and why do these things affect Apple? One would think that with Intel reporting a strong 4Q last night, and Credit Suisse raising their expectations on Apple’s future earnings growth, that Apple would weather this storm with ease. When in fact, Apple is actually underperforming the majority of the tech sector today.
Well first of all, the Consumer Sentiment survey is an important economic indicator, especially for a consumer products company like Apple. The Consumer Sentiment Survey is conducted by the University of Michigans Consumer Survey Center, and questions 500 households each month on their financial conditions and attitudes about the economy. It’s thought to be an excellent leading indicator of consumer spending, and if consumers aren’t spending, that could mean trouble for high-priced product companies like Apple.
As to JP Morgan, the odd thing is that they actually reported pretty good numbers that either met or exceeded Wall Street expectations. JP Morgan’s fourth-quarter earnings quadrupled, and exceeding forecasts, but its revenue came in below analysts’ estimates. The kicker came when CEO James Dimon warned the banking giant is cautious about the future. He noted, “consumer-credit costs remain high, and weak employment and home prices persist.” This is a double whammy on the consumer, and thus Apple.
And finally, one more thing is contributing to the extent to which Apple is down today compared to the rest of the tech sector, and that is that Apple is still extremely overbought in its long-term charts, particularly its weekly and monthly charts, and momentum, as illustrated by it’s MACD, is showing a negative divergence to price. This is providing further pressure as buyers are becoming more and more scarce as bullish positions are at peak levels. You combine this with low volume, and it makes it very easy for sellers of AAPL to do their bidding and bring the stock down.
Tagged as: Consumer Sentiment, Intel
