Chinese officials reportedly urging government employees to stop using iPhones has led to a significant drop in Apple’s stock value. In just two days, the tech giant’s stock plummeted 6%, marking the largest consecutive decline in 10 months. Given that Apple has a significant presence in China, this news isn’t entirely surprising. There is speculation about whether China will take further measures, such as shutting down Apple stores to send a message to the West.
What’s interesting is that while Apple’s stock has been affected, the wider tech-heavy Nasdaq Composite hasn’t seen a similar decline. Over the past five trading sessions, the Nasdaq has only dropped 1.9% compared to Apple’s nearly 6% slide. This is likely due to the fact that the 10-year yield, which had been rising rapidly, seems to be leveling off. Investors are hesitant to sell off tech stocks as they typically don’t perform well when interest rates are on the rise.
Goldman Sachs managing director Eric Sheridan explains that there has already been a reset of technology valuations to account for the previous rise in rates. Unless rates reach around 5%, there may not be a further decline. In fact, there is a belief that the probability of a recession is decreasing, and the Federal Reserve is unlikely to raise rates in the near future.
At the recent Goldman Sachs Communacopia and Tech Conference, there was a strong appetite for owning top tech stocks. The decline in yields has created opportunities to invest in fundamentally strong companies. While concerns about Apple’s situation in China were not entirely dismissed, it is clear that the tech industry has a brighter side, fueled by the current market conditions.
In conclusion, Apple’s stock has taken a hit due to reports of Chinese officials asking government employees to stop using iPhones. However, the broader tech industry has not experienced a similar decline. The leveling off of the 10-year yield and the belief that the Federal Reserve will pause on rate hikes has made investors more cautious about selling off tech stocks. There is still significant interest in top tech companies, driven by the opening up of entry points into fundamentally strong names.
Sources: Yahoo Finance