Amazing how one minuscule headline could take down shares of tech titan Apple (AAPL).
As Yahoo Finance’s Jared Blikre wrote on Friday in this space, Apple’s stock tanked 6% from Wednesday’s opening bell to Thursday’s close. It marked the biggest back-to-back slide in 10 months.
The culprit as you may know by now: Chinese officials are reportedly asking government employees to stop using iPhones.
Considering Apple does big business in China, it’s not a total shocker this headline would take a bite out of the stock. Who is to say China doesn’t order a shutdown of Apple stores to send a message to the West? We don’t know, and that’s why Apple’s stock has gotten hit.
But interestingly, while Apple’s stock has come under selling pressure — the broader tech-heavy Nasdaq Composite has not. Over the last five trading sessions, the Nasdaq is only down 1.9% compared to Apple’s nearly 6% slide.
Why? It’s the sunnier side of the tech trade, in that the 10-year yield has stopped its meteoric ascent as it appears the Fed will pause on rate hikes at its meeting later this month.
That has investors tepid to dump tech names, which normally don’t act well when rates are on the rise.
“I think we went through a process of investors absorbing higher rates for longer at the end of last year and the first half of this year, and you saw a very aggressive reset of valuations and technology in the second half of 2022,” Goldman Sachs managing director Eric Sheridan explained to me at the Goldman Sachs Communacopia and Tech Conference last week.
Added Sheridan, “We think that reset has mostly happened at this point, unless there is a chance that 5% rates, plus or minus, are going to be the new normal. If we end up with higher rates than that, we’ll have to go through another valuation reset, probably for the broader group. But our house view… would be the recession probability is coming down and the Fed is unlikely to raise rates anytime soon in the next couple of meetings.”
I certainly saw the appetite to own top tech names at the Goldman conference. Packed conference rooms for presentations by Nvidia, AMD and countless others. Not one person I talked with called out Apple/China risk as weighing heavily on their decision-making process on tech stocks.
What they did call out was — to Sheridan’s point — a cooling in yields opening up some entry points into fundamentally strong names.
So not to dismiss the buzzy Apple/China news, but there is a sunnier side to tech —as if often the case in life.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email firstname.lastname@example.org.