Tag: AAPL

Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks

Investors in index funds have been well rewarded by a high concentration in the largest technology companies over the past decade. But there are also continuing warnings about the risk of such heavy concentrations, even in index funds that track the S&P 500. Solutions are offered to limit this risk, but if you expect Big Tech to continue to drive the broad market returns over the coming years, why not make an even more focused bet?

Comparisons of three index-fund approaches highlight how successful concentration in the “Magnificent Seven” has been.

The Magnificent Seven are Apple Inc.
AAPL,
+0.16%,
Microsoft Corp.
MSFT,
+0.72%,
Nvidia Corp.
NVDA,
-2.03%,
Amazon.com Inc.
AMZN,
+2.17%,
Alphabet Inc.
GOOGL,
-0.27%

GOOG,
-0.32%,
Tesla Inc.
TSLA,
+9.37%
and Meta Platforms Inc.
META,
+1.67%.
We have listed them in the order of their concentration within the Invesco S&P 500 ETF Trust
SPY,
which tracks the S&P 500
SPX.
The U.S. benchmark index is weighted by market capitalization, as is the Nasdaq Composite Index
COMP
and the Russell indexes.

SPY is 27.6% concentrated in the Magnificent Seven. One way to play the same group of 500 stocks but eliminate concentration risk is to take an equal-weighted approach to the index, which has worked well for certain long periods. But here, we’re focusing on how well the concentrated strategy has worked.

Let’s take a look at the group’s concentration in three popular index approaches, then look at long-term performance and consider what happened in 2022 as rising interest rates helped crush the tech sector.

Here are the portfolio weightings for the Magnificent Seven in SPY, along with those of the Invesco QQQ Trust
QQQ,
which tracks the Nasdaq-100 Index
NDX
and the Invesco S&P 500 Top 50 ETF
XLG
:

Company	Ticker	% of SPY	% of QQQ	% of XLG
Apple Inc.	AAPL, +0.16%	7.05%	10.85%	12.46%
Microsoft Cor.	MSFT, +0.72%	6.65%	9.53%	11.76%
Amazon.com Inc.	AMZN, +2.17%	3.30%	5.50%	5.84%
Nvidia Corp.	NVDA, -2.03%	3.02%	4.44%	5.33%
Alphabet Inc. Class A	GOOGL, -0.27%	2.17%	3.12%	3.83%
Alphabet Inc. Class C	GOOG, -0.32%	1.88%	3.11%	3.32%
Tesla Inc.	TSLA, +9.37%	1.79%	3.10%	3.17%
Meta Platforms Inc. Class A	META, +1.67%	1.77%	3.60%	3.12%
Totals		27.63%	43.25%	48.83%
Sources: Invesco Ltd., State Street Corp.

The same group of seven companies (eight stocks with two common share classes for Alphabet) is at the top of each exchange-traded fund’s portfolio, although the top seven for QQQ aren’t in the same order as those for SPY and XLG. QQQ’s weighting was changed recently as the underlying Nasdaq-100 underwent a “special rebalancing” last month.

Here’s a five-year chart comparing the performance of the three approaches. All returns in this article include reinvested dividends.

FactSet

QQQ has been the clear winner for five years, but it is also worth noting how well XLG has performed when compared with SPY. This “top 50” approach to the S&P 500 incorporates many stocks that aren’t listed on the Nasdaq and therefore cannot be included in QQQ, which itself is made up of the largest 100 nonfinancial companies in the full Nasdaq Composite Index
COMP,
+0.45%.

Examples of stocks held by XLG that aren’t held by QQQ include such non-tech stalwarts as Berkshire Hathaway Inc.
BRK.B,
+0.77%,
Johnson & Johnson
JNJ,
+0.79%,
Procter & Gamble Co.
PG,
+0.94%,
Home Depot Inc.
HD,
-0.12%
and Nike Inc.
NKE,
-0.42%.

Now let’s go deeper into long-term performance. First, here are the total returns for various time periods:

ETF	3 Years	5 Years	10 Years	15 Years	20 Years
SPDR S&P 500 ETF Trust SPY	40%	69%	223%	370%	531%
Invesco QQQ Trust QQQ	41%	113%	430%	882%	1,158%
Invesco S&P 500 Top 50 ETF XLG	41%	85%	262%	404%	N/A
Source: FactSet

Click on the tickers for more about each ETF, company or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

There is no 20-year return for XLG because this ETF was established in 2005.

For five years and longer, QQQ has been the runaway leader, but for 5, 10 and 15 years, XLG has also beaten SPY handily, with broader industry exposure.

Something else to consider is that during 2022, when SPY was down 18.2%, XLG fell 24.3% and QQQ dropped 32.6%.

For disciplined long-term investors, the tech pain of 2022 may not seem to have been a small price to pay for outperformance. And it may have been easier to take the pounding when holding SPY or even XLG that year.

Here’s a look at the average annual returns for the three ETFs:

ETF	3 years	5 years	10 years	15 years	20 years
SPDR S&P 500 ETF Trust SPY	11.8%	11.0%	12.4%	10.9%	9.6%
Invesco QQQ Trust QQQ	12.0%	16.3%	18.2%	16.4%	13.5%
Invesco S&P 500 Top 50 ETF XLG	12.2%	13.1%	13.7%	11.4%	N/A
Source: FactSet

So the question remains — do you believe that the largest technology companies will continue to lead the stock market for the next decade at least? If so, a more concentrated index approach may be for you, provided you can withstand the urge to sell into a declining market, such as the one we experienced last year.

Here is something else to keep in mind. In a note to clients on Monday, Doug Peta, the chief U.S. investment strategist at BCA, made a fascinating point: “The only novel development is that all the heaviest hitters now hail from Tech and Tech-adjacent sectors and are therefore more prone to move together than they were at the end of 2004, when the seven largest stocks came from six different sectors. “

Nothing lasts forever. Peta continued by suggesting that investors who are tired of big tech taking all the glory “need only wait.”

“[I]f history is any guide, their time at the top of the capitalization scale will be short,” he wrote.

Don’t miss: These four Dow stocks take top prizes for dividend growth

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September 11, 2023

Apple Stock Is Rising. Tech Names From Tesla to Nvidia Can Breathe a Sigh of Relief.

The fortunes of

Apple

the world’s largest public company, have a tendency to lead around much of the rest of the stock market. After the tech giant’s woes contributed to widespread declines last week, investors can now breath…

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September 11, 2023
The iPhone 15 is coming: Everything to expect from Apple’s big event

For Apple fans, it’s almost that time of year again.

The company is expected to launch the iPhone 15 at an event Tuesday, but don’t get too excited about the new phone. This year, the biggest change from Apple
AAPL,
+0.35%
could be the iPhone’s price.

Apple tends to introduce new iPhones every year in the fall, and lately, the company has been keeping prices the same even as it upgrades the technology. That may not be the case this year, though, with some thinking that Apple could boost the price of its Pro-level models by $100 or $200 compared with what an iPhone 14 Pro currently sells for.

That’s notable because iPhones are already pretty expensive, with the cheapest iPhone 14 Pro option selling for $999 and the priciest iPhone 14 Pro Max configuration going for $1,599.

“Given the popularity of the iPhone 14 Pro models compared to the iPhone 14 models, Apple may believe consumers will be willing to pay more without much fuss,” Monness, Crespi, Hardt & Co. analyst Brian White wrote in a recent report. “Moreover, Apple may feel a price hike is warranted given the inflationary forces that have disrupted the economy over the past couple of years.”

Morgan Stanley’s Erik Woodring is less certain that Apple will hike prices broadly. The company could boost the price of its Pro Max phone by $150 to account for an expected new rear-facing periscope lens, but it’s “very un-Apple-like to raise prices across the board in the midst of a smartphone market down 11%,” he wrote. He said he expects the company to keep prices the same on the regular Pro model and its two base-level options.

One key issue for iPhone enthusiasts — and Apple investors — is when the new phones will be ready for sale. Most of the iPhone models Apple introduced last year hit stores in mid-September, but there are some concerns about potential production delays this year.

Read: Waiting for the iPhone 15? You might have to hold out longer than you think.

“The broad availability of the iPhone 15 Pro Max could be October given some manufacturing challenges,” BofA Securities analyst Wamsi Mohan wrote recently.

iPhone feature updates have become more incremental in recent years, and Apple watchers aren’t expecting anything groundbreaking this time around either. New iPhones always tend to be a little faster than their predecessors, and this year’s models might charge more quickly too. There’s a catch, though, as Apple is expected to switch out its proprietary Lightning cable for the more universal USB-C cord.

While the Pro models get a lot of attention, White said that those looking to buy base-level models could see some enhancements. Reports “have highlighted the potential for the iPhone 15 and iPhone 15 Plus to be graced with certain features found on last year’s more expensive Pro models, including the A16 chip, Dynamic Island, and a 48-megapixel camera,” he wrote.

Why go Pro? Apple could move to a titanium frame from its prior stainless-steel casing and make camera enhancements. Mohan highlighted the potential for a periscope-type telephoto lens on Max versions.

Apple fans “should also see more casing quality color differentiation between the Pro and regular series to help drive vanity switchers to the higher-priced models,” Jefferies analyst Andrew Uerkwitz wrote recently.

There could be a dark blue color option for the iPhone Pro line this year, for example, according to 9to5Mac. That said, those content with the base-level model might be enticed by a pink version of that phone, with 9to5Mac noting that that’s one of several rumored pastel color options.

Read: Here’s why Wall Street may be overreacting about Apple’s China’s challenges

Apple is also expected to refresh its Apple Watch lineup at Tuesday’s event. Bloomberg News has reported that the Apple Watch Series 9 could feature a faster processor, though it will have the same general design as past models. Apple is also expected to keep the look the same on an upgraded version of its Ultra Watch, and that might come in a black color option.

The event kicks off at 1 p.m. Eastern time Tuesday and will be available for live viewing on Apple’s site.

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September 10, 2023
Sorry, Elon, a ‘super app’ is never going to fly in the U.S.

“Super apps” have never truly existed in the United States, and it is apparent at this point that they never will.

That isn’t stopping some executives and investment analysts from still dreaming of becoming one-stop shops for their users’ needs, something only a small handful of apps in Asia have managed to do. The most prominent is Elon Musk, the Tesla Inc. TSLAchief executive who purchased Twitter last year and has proclaimed that he will turn it into an “everything app” called X that resembles super apps in China.

“I…

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September 7, 2023
Here’s why Wall Street may be overreacting about Apple’s China’s challenges

Apple Inc. shares sold off for the second session in a row Thursday amid swirling concerns about the company’s China business, but some analysts say those fears may be overblown.

The Wall Street Journal reported earlier this week that China was banning government officials from using iPhones for work purposes, while Bloomberg News reported that the ban could ultimately extend to government-backed agencies and state companies. The question for investors is whether the issue will be limited to state-affiliated employees in…

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September 7, 2023
Nasdaq falls for 4th straight session as Apple weighs on technology stocks

U.S. stocks finished mostly lower on Thursday with the Nasdaq Composite leading the way down as investor sentiment cratered in the face of concerns that the Federal Reserve may keep interest rates higher for longer. The technology-heavy Nasdaq
COMP,
-0.89%
fell 123 points, or 0.9%, to end at 13,748, while suffering its four consecutive sessions of losses. The Dow Jones Industrial Average
DJIA,
+0.17%
was up 0.2%, and the S&P 500
SPX,
-0.32%
dropped 0.3%. Apple shares
AAPL,
-2.92%
were down for a second day, after the Wall Street Journal reported that China had banned government officials from using iPhones for work purposes. In U.S. economic data, initial jobless benefit claims fell by 13,000 to 216,000 in the week ended Sept. 2, the U.S. Labor Department said Thursday. This is the lowest level since mid-February.

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September 7, 2023
Arm Sets Target Valuation for IPO. It’s Likely to Be the Biggest of the Year.

Arm Holdings is set for a blockbuster initial public offering which will test market appetite for an important technology company. However, its targeted valuation suggests it is accepting it won’t be the next

Nvidia

…

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September 5, 2023
What’s worth streaming in September 2023? Here are your best bets amid slim pickings.

Looking to spend your entertainment dollars wisely in September? Watch Hulu and read a book or two.

That pretty much sums up a hugely underwhelming lineup from streaming services, which burned through their best shows in the spring and have little to offer for the start of the traditional fall TV season. That’s not to say there aren’t a handful of promising shows — there are — but is one decent new show per service worth the price of multiple monthly subscriptions? Almost certainly not.

It’s…

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September 3, 2023
The iPhone 15 Can’t Come Soon Enough for Apple

The new iPhone 15 is coming in September. History says the month is a wash.

LCG Auctions

Not even

Apple was invincible to this tough August. And if investors are pinning their hopes on the iPhone 15 launch in just a couple of weeks, they could very we…

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September 1, 2023
Heineken is the latest Western corporate giant to exit Russia

Beer giant Heineken N.V. is the latest Western company to exit Russia, announcing Friday the sale of its Russian operations to Arnest Group for one euro.

Under the terms of the deal, all of Heineken’s
HEIA,
+0.77%
remaining assets, including seven breweries in Russia, will transfer to the new owners, the beer giant said in a statement. The Russian Arnest Group has also taken over responsibility for Heineken’s 1,800 employees in Russia.

Heineken began the process of exiting Russia in March 2022, following that country’s invasion of Ukraine. The company said it expects to incur a total cumulative loss of €300 million ($324.1 million) as a result of its exit.

“We have now completed our exit from Russia. Recent developments demonstrate the significant challenges faced by large manufacturing companies in exiting Russia,” Heineken CEO Dolf van den Brink said in a statement. “While it took much longer than we had hoped, this transaction secures the livelihoods of our employees and allows us to exit the country in a responsible manner.”

Related: Unilever CEO vows to look at Russian operations with ‘fresh eyes’ as pressure to exit the country mounts

A number of major Western corporations, including U.S. giants Apple Inc.
AAPL,
+1.26%,
Alphabet Inc.
GOOGL,
+0.08%

GOOG,
+0.21%,
Amazon.com Inc.
AMZN,
+1.08%,
International Business Machines Corp.
IBM,
+1.25%
and McDonald’s Corp.
MCD,
+0.79%,
have left Russia in response to Moscow’s February 2022 invasion of Ukraine.

Earlier this week, DP Eurasia, the master franchiser of the Domino’s Pizza Inc.
DPZ,
+0.49%
brand in Turkey, Russia, Azerbaijan and Georgia, also announced its exit from Russia.

But Heineken is “no hero,” according to Mark Dixon, the founder of the Moral Rating Agency, an organization set up after the invasion of Ukraine to examine whether companies were carrying out their promises of exiting Russia. “It failed to leave Russia for a year and a half,” he told MarketWatch via email. “The explanation that it took longer than expected doesn’t hold water, because of course it’s difficult to find a buyer if you remain so long a pariah state.”

The Ukraine Solidarity Project said that Heineken’s move should increase the pressure on companies that remain in Russia, such as consumer-goods giant Unilever PLC
ULVR,
+0.44%.
“The point here is that major companies, like @Heineken, are and have taken loses of hundreds of millions and billions in leaving the Russian market. It is possible,” the Ukraine Solidarity Project tweeted Friday. “We’re sure @Unilever can do it, too.”

Related: WeWork, Carl’s Jr., Unilever and Shell among companies slammed by Yale over operations in Russia

The Ukraine Solidarity Project recently launched a high-profile campaign urging Unilever to get out of Russia, using images of Ukrainian veterans injured in the war with Russia. Last month, activists from the Ukraine Solidarity Project held up a giant poster featuring the veterans outside Unilever’s London headquarters.

The Moral Rating Agency has also reiterated its calls for Unilever to end its Russian operations.

“We have always said we would keep our position in Russia under close review,” a Unilever spokesperson told MarketWatch earlier this month. The spokesperson also directed MarketWatch to a statement on the war in Ukraine that the company released in February 2023.

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August 25, 2023
The iPhone 15 could help Apple clinch a title it’s never held before

In a dreary smartphone market, Apple Inc. could do something it’s never done before.

The consumer-electronics giant has a chance to finish the year as the global leader in smartphone shipments for the first time, according to analysts at Counterpoint Research.

Read: ‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine

Consumers continue to hold on to their smartphones for longer, one reason that the Counterpoint team expects overall shipments to fall 6% this year, to 1.15 billion units. That would be the lowest level in a decade.

“But we’re watching [the fourth quarter] with interest because the iPhone 15 launch is a window for carriers to steal high-value customers,” Jeff Fieldhack, Counterpoint’s North America research director, said in a release.

With a big base of current iPhone 12 owners due for upgrades, “promos are going to be aggressive, leaving Apple in a good spot.”

Counterpoint notes that premium smartphones have been picking up share within the market and called out China as a region where that trend holds true. Apple
AAPL,
-0.12%
focuses on the premium market and is expected to debut its next lineup of devices, the iPhone 15 family, in September, and sales likely will begin later that month or in early October.

Don’t miss: Meta’s stock joins Apple, Microsoft and Nvidia shares in correction territory as tech-stock boom fizzles

Projections from Counterpoint put Apple the closest its ever been to capturing the top spot. “We’re talking about a spread that’s literally a few days’ worth of sales,” Fieldhack said. “Assuming Apple doesn’t run into production problems like it did last year, it’s really a toss-up at this point.”

Samsung Electronics Co. Ltd.
005930,
+0.45%
was the market leader in shipments last year, and it held the top spot in the first quarter of this year.

Read on: Red flags waving for tech stocks as AI bounce fades, China fears escalate

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August 21, 2023
PayPal Stock Can’t Catch a Break. A Big Investor Cut Its Stake.

PayPal Stock Can’t Catch a Break. A Big Investor Cut Its Stake.

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August 17, 2023
Dow, S&P 500 and Nasdaq post gains as big tech stocks rebound

U.S. stocks closed higher on Monday, with the Dow flipping positive near the closing bell, as technology stocks bounced back. The Dow Jones Industrial Average DJIA rose about 26 points, or 0.1%, ending near 35,308, according to preliminary FactSet data. The S&P 500 index SPX scored a 0.6% gain and the Nasdaq Composite Index COMP closed up 1.1%, booking its best daily percentage climb since July 28, according to FactSet data. The S&P 500’s information technology sector outperformed with a 1.9% gain, while the communication services segment rose 1%. The rally saw shares of Meta Platforms META, Apple Inc. AAPL, Alphabet…

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August 14, 2023
The Stock Market’s Rally Paused. It’s Time to Buy the Dip.

The Stock Market’s Rally Paused. It’s Time to Buy the Dip.

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August 6, 2023
Surging S&P 500 Targets Finally Caught Up to the Stock Market. Why It’s Time to Buy Dips.

Surging S&P 500 Targets Finally Caught Up to the Stock Market. Why It’s Time to Buy Dips.

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August 4, 2023
Apple’s Tim Cook explains why he won’t showboat around AI

““We tend to announce things as they come to market, and that’s our M.O.””

— Apple CEO Tim Cook

If Apple Inc.’s Thursday earnings call sounded a bit different than other recent ones from Big Tech players, perhaps that was due to a noticeable lack of artificial-intelligence discussion.

In fact, AI didn’t come up at all on Apple’s
AAPL,
-0.73%
call until an analyst brought up the topic in the question-and-answer portion, commenting that Apple executives “don’t talk too much” about their AI strategy or investments, unlike many tech peers.

See also: Apple sees sales decline for third quarter in a row — and says performance could be similar this quarter

“If you take a step back, we view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build,” Chief Executive Tim Cook replied. AI helps power recently announced software features like live voicemails and the ability to replicate your voice digitally, as well as somewhat older features like automatic crash detection and fall detection.

AI technology has been “absolutely critical to us,” Cook said, and Apple has “been doing research across a wide range of AI technologies, including generative AI, for years,” something the company plans to continue.

But don’t necessarily expect Apple to start showboating around its AI efforts going forward: Cook said that Apple’s “M.O.” simply is to announce products when they’re ready for consumers.

“Apple’s reticence in being dragged into the AI hype is on-brand,” Forrester principal analyst Dipanjan Chatterjee said in emailed comments. “A maniacal focus on what Apple does for its customers and not how it does it is rooted so deeply in the brand’s DNA.”

In all, there were just six mentions of AI or artificial intelligence on Apple’s earnings call, all of which came during the Q&A exchange with Deutsche Bank analyst Sidney Ho. Compare that to 90 mentions of those terms on Alphabet Inc.’s
GOOG,
+0.10%

GOOGL,
+0.05%
earnings call last week, 73 mentions on Microsoft Corp.’s
MSFT,
-0.26%,
and 62 mentions on Meta Platforms Inc.’s
META,
-0.36%,
according to MarketWatch’s review of transcripts provided by AlphaSense/Sentieo.

Read: Microsoft and Google can’t stop talking about AI, and this chart proves it

Amazon.com Inc.
AMZN,
+0.55%,
which joined Apple in posting results Thursday, falls somewhere in the middle. The topic of AI garnered 34 mentions on Amazon’s call.

Whereas Apple has been consistent with its scant mentions of the technology, Amazon executives have been ramping up the rhetoric: AlphaSense/Sentieo data shows just one AI mention on the earnings call Amazon held in February 2022, and then no mentions until the term came up 12 times on its April 2023 call. Volume was of course up considerably from there on Thursday’s call.

See also: The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

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August 3, 2023
Apple sees sales decline for third quarter in a row — and says performance could be similar this quarter

Apple Inc. saw revenue fall slightly in the latest quarter, and its management expects similar performance in the current period.

The tech giant on Thursday posted sales of $81.80 billion for the fiscal third quarter, matching the FactSet consensus but marking a decline from the $82.96 billion seen a year before. Apple logged $39.67 billion in revenue for its iPhone business, down from $40.67 billion a year before and below the FactSet consensus, which was for $40.24 billion.

Read: Apple dubbed the most ‘boring’ buy-rated stock — and that’s actually a good thing

Chief Financial Officer Luca Maestri expects Apple’s
AAPL,
-0.73%
overall September-quarter revenue performance to be similar to what was seen in the June quarter. He anticipates that year-over-year iPhone and services revenue will accelerate from the June quarter, while the Mac and iPad businesses could post double-digit declines relative to a year earlier due to tough comparisons to that period.

Shares of Apple fell 2% in after-hours action. The latest quarter marked the third in a row of revenue declines.

Apple recorded $5.79 billion in June-quarter iPad revenue, down from $7.22 billion a year before and below the FactSet consensus, which called for $6.44 billion. Mac revenue came in at $6.8 billion, down from $7.38 billion a year earlier but ahead of the consensus view: Analysts were modeling $6.26 billion in Mac revenue.

The company saw $8.28 billion in revenue within its wearables, home and accessories business. That compared with a year-before total of $8.08 billion. The FactSet consensus was for $8.31 billion.

Services revenue increased to $21.21 billion from $19.60 billion, while analysts were projecting $20.73 billion.

See more: Apple savings account racks up $10 billion in deposits since April debut

Despite “a challenging smartphone market in the U.S. currently,” Chief Executive Tim Cook said on the earnings call that Apple was seeing “some really good signs in most places in the world.”

He called out strength in emerging markets, where Apple did “exceptionally well” in the latest quarter. In China, the company swung to 8% revenue growth after logging a 3% decline in revenue during the March quarter.

Apple also disclosed a June-quarter revenue record in India, where it recently opened its first retail stores.

While Cook is “pleased” with Apple’s India growth, he also noted that the company’s current market share in the country is “very, very modest.”

“So I think that it’s a huge opportunity for us, and we’re putting all of our energies in making that occur,” he said.

The tech giant booked fiscal third-quarter net income of $19.88 billion, or $1.26 a share, compared with $19.44 billion, or $1.20 a share, in the year-prior period. Apple beat the FactSet consensus, which was for $1.20 in earnings per share.

Don’t miss: Apple has a juicy $40 billion opportunity ahead of it

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August 3, 2023
Warren Buffett Isn’t Worried About the Fitch Downgrade
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/warren-buffett-berkshire-hathaway-fitch-downgrade-t-bills-2a6d71a9
Updated Aug. 3, 2023 1:57 pm ET / Original Aug. 3, 2023 8:38 am ET

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Berkshire Hathaway

CEO Warren Buffett says he’s not concerned about the Fitch downgrade of the U.S. government’s credit rating, saying his company continues to buy $10 billion of Treasury bills each week.
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August 3, 2023
The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

A wider swath of stocks have joined the S&P 500
SPX,
+0.15%’s
upswing after the so-called Magnificent Seven — Apple
AAPL,
+0.32%,
Amazon
AMZN,
+1.11%,
Alphabet
GOOG,
+0.08%,
Microsoft
MSFT,
-0.72%,
Meta
META,
-2.11%,
Nvidia
NVDA,
-0.04%
and Tesla
TSLA,
+0.37%
— single-handedly propelled the large-cap index into a bull market in early June, with the gauge now up more than 28% from its low notched last October and rising to new highs since April 2022, according to Dow Jones Market Data.

Hopes that the U.S. economy could pull off a soft landing and avoid a recession despite the Federal Reserve’s aggressive interest-rate hikes, as well as receding inflation pressures and expectations for the end of the Fed’s monetary tightening campaign, have underpinned a notable expansion in market breadth over the past two months, according Adam Turnquist, chief technical strategist at LPL Financial.

The S&P 500 Equal Weighted Index
SP500EW,
+0.27%,
which lagged behind the market-cap-weighted S&P 500 index for most of the year, has now kicked back into gear and staged an impressive comeback in July. The equal-weighted index and the S&P 500 each advanced 3.1% this month, according to FactSet data.

The equal weighting eliminates the distortion of the megacap components and significantly changes several sector weightings in the S&P 500, including technology, which drops from around 29% on the SPX to only 13% on the equal-weighted index, said Turnquist in a Friday note. Meanwhile, the industrials sector has the biggest increase in weight, jumping from 9% on the SPX to 16% on the equal-weighted index.

Another way to quantify and compare market breadth is to look at the percentage of stocks on an index trading above their longer-term 200-day moving average (dma), Turnquist said. In general, if a stock is trading above its 200 dma, it is considered to be in an uptrend, and if the price is below the 200 dma, it is considered in a downtrend. Furthermore, a higher percentage of stocks above their 200 dma implies buying pressure is more widespread — suggesting the market’s advance is likely sustainable.

The chart below shows that 73% of stocks within the S&P 500 are trading above their 200 dma as of July 27, which compares to only 48% at the end of 2022. Moreover, the composition of breadth leadership has turned increasingly bullish. The highest sector readings include technology, industrials, energy, and consumer discretionary.

“So not only is breadth on the index robust, but cyclical stocks are also leading,” said Turnquist.

SOURCE: LPL RESEARCH, BLOOMBERG

Wall Street often views broadening participation in the stock-market rally as a measure of health and a constructive sign of the sustainability of the bull market.

Jimmy Lee, founder and chief executive officer of The Wealth Consulting Group said he is seeing “a lot of money” flowing into areas that are not the Magnificent Seven such as stocks in the industrials, financials, materials, energy and even real-estate sectors.

The S&P 500’s industrials sector
SP500.20,
+0.23%
climbed 2.9% in July, while the financials sector
SP500.40,
+0.44%
advanced over 4.7% this month. The S&P 500’s energy sector
SP500.10,
+2.00%,
which had been the biggest laggard when the rest of the markets exited the bear market in June, jumped 7.3% month to date after the U.S. oil benchmark
CL.1,
-0.20%

CL00,
-0.20%
closed above $80 a barrel for the first time since April.

Meanwhile, the tech-heavy S&P 500’s communication-services sector
SP500.50,
-0.03%
rose 6.7% in July, while the consumer-discretionary sector
SP500.25,
+0.56%
gained 2.4% and the information-technology sector
SP500.45,
+0.13%
was up 2.6%, according to FactSet data.

See: Stocks are on a seemingly unstoppable hot streak, but this bond-market ‘tipping point’ could see it end in a hurry

Stephen Hoedt, managing director of equity and fixed income research at Key Private Bank, told MarketWatch in an interview that he doesn’t see “any reason to get bearish here with the fundamentals that are underlying,” which gives investors reason to rotate toward the more cyclical areas such as energy, financials and industrials, while broadening the market away from just being concentrated in the megacap technology names.

“The growth has been a surprise this year for everyone, so that’s what the market got wrong coming into this year. When I look at growth, nominal GDP growth translates directly into earnings and we’ve seen earnings continue to surprise on the upside,” Hoedt said.

Hoedt pointed to the direction of the 12-month forward earnings estimate for the S&P 500 as an important indicator. “As long as the direction of the 12-month forward earnings number for the S&P 500 is going up, it’s really, really difficult to be bearish on the stock market,” he said. “It seems to me that we may start to see another inflection higher in forward earnings revisions that take into account this stronger growth environment that we’re in.”

However, the broadening of the stock-market rally and the bullish sentiment were also driving some on Wall Street to believe stocks are overbought and due for a correction.

Lee said there’s still too much pessimism out there and too much concern that some investors haven’t chased the market yet. “In the second half of this year, when the Fed does stop raising rates and if the economy stays out of recession, you can see major money — trillions of dollars moving from the money market into equities and other risk assets,” he told MarketWatch in a phone interview on Friday.

“When that happens, it’s probably going to push valuations even further. So I would imagine when that happens is when you can expect more of a correction to occur, but I think that we still have more room to go before that happens.”

U.S. stocks ended higher on Monday, finishing up July on a positive note. Three major stock indexes rallied this month, with the S&P 500 up 3.1% and booking its fifth monthly gain. The tech-heavy Nasdaq Composite
COMP,
+0.21%
gained 4.1% month to date, while the Dow Jones Industrial Average
DJIA,
+0.28%
advanced 3.4%, according to Dow Jones Market Data.

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July 31, 2023
Amazon and Apple to headline Q2 earnings this week

When Amazon.com Inc. and Apple Inc. report quarterly results on Thursday, we’ll get a look at two big companies, with big expectations, trying to do smaller things — or at least less exciting things, or things that might be more inconveniencing to customers — to stay bigger.

For Apple
AAPL,
+1.35%,
D.A. Davidson analyst Tom Forte said, the focus will be on the iPhone, as always, as well as demand abroad and a new VR headset, as its stock hovers near record highs and its market value holds above $3 trillion. And he said that Amazon
AMZN,
+3.09%,
meanwhile, could face questions about the impact of cost cuts on e-commerce growth, and what AI could do to boost slower growth in its cloud business.

The results from those companies, which are big enough to make or break a single quarter’s worth for the S&P 500 Index
SPX,
+0.99%,
will follow those from the other tech giants like Microsoft Corp.
MSFT,
+2.31%
and Facebook parent Meta Platforms Inc.
META,
+4.42%.
And they’ll arrive as Wall Street starts to get a tad more realistic about AI: Microsoft shares fell after management said the expansion of its AI capabilities would be “gradual” — and gradually more expensive.

D.A. Davidson analyst Tom Forte, in a research note this month, said Amazon, like other big tech companies, was taking more steps to control its costs. That might help margins, he said. But he said he’d be watching for any impact to e-commerce sales growth, following thousands of layoffs and pulling back on its expansion of Amazon Fresh.

Amazon began tacking on servicing fees onto some Amazon Fresh delivery orders this year. And Forte noted what he said were other tweaks to service: Charging for a home pickup of a defective smoke alarm that used to be free, and incentives to wait longer during Prime Day.

“In our view, Amazon is playing a ‘game of chicken’ and banking on other e-commerce companies not to offer a superior service, instead of its historical approach of working backwards with a customer-obsessed approach,” D.A. Davidson analyst Tom Forte said in a research note.

He added later: “We believe there is something to be said about the experience of having an Amazon-branded delivery vehicle show up at your house EVERY day. Having one show up once a week or twice is not the same.”

At Apple, Forte said in a separate note, the iPhone, whose sales were still solid, had turned into more of a consumer staple than a discretionary buy. He also said he’d be looking for more detail about the upcoming iPhone 15 — likely to be modestly fancier than previous iPhones — the recovery in China and growth in India. Apple last month also unveiled its Vision Pro VR headset — for $3,499. Forte said he had his doubts.

“We believe Apple will have to overcome a number of structural challenges to achieve mass adoption for its AR/VR headset,” he said.

This week in earnings

Apple and Amazon will report as more companies than normal report quarterly profit ahead of estimates, according to a FactSet report on Friday. For the week ahead, 170 S&P 500 companies report results, with four from the Dow, the repot said.

Results from Uber Technologies Inc.
UBER,
+3.28%
and DoorDash Inc.
DASH,
+4.20%
will offer an update on the gig economy and how far app-based deliveries can go, while results from Kraft Heinz Inc.
KHC,
-0.11%
will offer an update on food prices and how much they might ease from the highs seen in recent months.

With the “Barbie” movie lifting rival Mattel Inc.
MAT,
-2.40%,
results from Hasbro Inc
HAS,
-0.29%
during the week will offer a glance at the rest of the toy industry, where demand hasn’t exactly been great, and what entertainment options Hasbro has up its sleeve to keep apace with its archrival. Drug maker Pfizer Inc.
PFE,
-0.36%
reports, as does video-game maker Electronic Arts Inc.
EA,
+0.25%.
Starbucks Corp.
SBUX,
+0.47%
reports as well.

The call to put on your calendar

“Barbie,” the Hollywood strike and Warner Bros. Discovery: Mattel has said it wants to turn “Barbie” into a content franchise. Now we’ll hear what Warner Bros. Discovery Inc.
WBD,
+4.07%,
the media conglomerate that produced the film, thinks about the film’s results and its prospects, as studios increasingly pump out sequels or offshoots of well-known, established character universes like “Star Wars,” Marvel and DC. The company — which reports oversees Warner Bros. CNN, TNT and the streaming service Max — reports quarterly results on Thursday. But even as “Barbie” and “Oppenheimer” carry the parts of the entertainment industry that are still functioning through the Hollywood strike, Wall Street will likely be focused on contingency plans, and any sense of whether more viewers are turning to streaming with productions on pause.

The number to watch

Payments and crypto volumes: Results this week from trading app Robinhood Markets Inc.
HOOD,
+4.09%
and crypto exchange Coinbase Global Inc.
COIN,
+2.23%,
along with PayPal Holdings Inc.
PYPL,
+2.71%
and Block
SQ,
+3.42%,
will land at the intersection of rebounding markets and job-market concerns.

UBS analysts predicted solid growth and cost control for Block, and “steady” e-commerce trends for PayPal. But BofA analysts said PayPal’s search for a new chief executive, following the announcement of Dan Schulman’s retirement at the end of the year, would become more important, adding that “we think investors should rightfully expect the CEO search to conclude in the near-term.” While Bitcoin’s rebound helped Coinbase, the company and others in the industry face the prospect of tougher regulations. Robinhood and PayPal report on Wednesday. Coinbase and Block report on Thursday.

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July 30, 2023

Tag: AAPL

The new iPhone 15 is coming in September. History says the month is a wash.

SOURCE: LPL RESEARCH, BLOOMBERG

This week in earnings

The call to put on your calendar

The number to watch