Apple loses ground in China

Stocks slipped yesterday in a vacuum of news leaving unguided traders on their own to stare down and justify bubble-like valuations approaching or at new highs. Bitcoin is banging its head on the ceiling high set in 2021, and with ETFs online, there is lot more wind to fill its sails— in either direction.

Hot-blooded. Did you notice that it has become more common to hear that this stock or that has gone up or down by double-digits percent BEFORE THE MARKET EVEN OPENS. I remember when it was big news if a stock moved by 1%; clearly that is no longer the world we live in. The same applies to indexes in which we can see 1+ percent moves quite often in when in years past we would measure big days with moves of over 0.5%. Let’s talk about the S&P500 Index for a moment. I am sure that I could dig up the baseball cap that I got in 1998 that read simply “1000.” No, it was not celebrating the birth year of my son, now 25 years old, nor was it celebrating my graduation from MBA, now also 25 years old – both are still important to me 😉. It was celebrating the S&P500’s first close over 1,000. That move was helped by the Dot Com era, now known as the Dot Com Bubble… in retrospect. Regardless, I had to wait until the summer 2014 to get another cap with “2,000” on it. That’s right, 16 years! It took 16 years for the S&P500 to go from 1,000 to 2,000. Talking about it now makes it seem straight forward, but I can assure you, it was not, and I have the scars to prove it.

Anyway, we finally got there, though 2014 was hardly a celebration as momentum began to dwindle with markets tumbling immediately thereafter, only to be followed by a brief recovery and the index declining marginally in the following year after double-digit gains in the 3 years prior. Well, you probably know where this story is going by now but bear with me. It only took about 5 years to add the third cap to my collection, and I received my “3000” cap in early 2019. I left that one in my desk at work. Why? Well, its value had diminished with those big levels becoming more and more common. I will admit, I was a bit concerned as corporate earnings were starting to show some signs of trouble, and I considered bringing the hat home as it did not appear likely that I would be getting another one soon. But then the Fed decided to conduct what it termed as a “mid-cycle adjustment,” which would include rate cuts. Those cuts would put my hat collection back in play. Unfortunately, 2020 ushered in the COVID pandemic and by March of that year I thought that my collection was destined for a museum and wondered if the nice folks that gave me the caps would ask me to return them if the market went back to those levels. But alas, that was not meant to be. It took only 2 years to hit 4,000 and another 2 to hit 5,000.

So, what is next for my cap collection? Though index moves these days seem large in absolute terms, the VIX volatility index is relatively tame at around 13 after some brushes with 20 last year. The VIX at 13 suggests that the market has the potential to move up or down by 0.80%. For reference, the VIX was above or close to 20 for much of 2020 through mid-2023, which suggests daily moves of around 1.25%. Moves of that magnitude would certainly get us to 6,000 a lot faster… but also back to 4,000 as well. Looking at the VIX chart, it does look like it is trending up slightly, though it is unclear what that portends. Just to be safe, I am bringing home the 2 hats in my office drawer that read “4,000” and “5,000” … to make room for a new one 😉… just in case.

WHAT’S HOT THIS MORNING

Target Corp (TGT) shares are higher by +7.81% in the premarket after it announced that it beat EPS and Revenue estimates by +24.10% and +0.37% respectively. The company gave current quarter and full-year guidance that were in line with analyst expectations. In the past month 10 analysts have raised their target while 1 has lowered. Dividend yield: 2.92%. Potential average analyst target upside: +5.4%.

Apple Inc (AAPL) shares are lower by -2.25% in the premarket after it was reported that the companies iPhone sales in China have slipped by 24% in the first 6 weeks of the year. That puts Apple as the 4^th largest mobile phone provider in China. 57.9% of analysts that cover Apple rate it as a BUY, 29.8 rate it a HOLD, and 12.3% rate it a sell. We will have to wait until May to get Apple’s Q1 results. Dividend yield: 0.543%. Potential average analyst target upside: +14.4%.

YESTERDAY’S MARKETS

NEXT UP

• Factory Orders (Jan) are expected to have slipped by -3.0% after a small gain of +0.2% in the prior period.
• ISM Services Index (Feb) may have slipped slightly to 53.0 from 53.4.
• S&P Global US Services PMI (Feb) is expected to come in at 51.4, slightly higher than earlier, flash estimates.
• Fed Vice Chair Michael Barr will speak today.