Can Apple Resume Its Role as a Market Leader?
The market still faces technical resistance as it deals with job news and Apple's impact.
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Apple's AAPL March quarter just slightly beat revenue and earnings expectations, but after announcing the biggest stock buy-back in history, the stock was trading up more than 5% on Friday morning. There is a sense of relief that the report wasn't that bad, and a number of analysts are raising price targets and making positive comments.
The reality of Apple is that it is still an extremely expensive stock. EPS increased 1% over last year, and revenue was down 4%. It trades with a trailing PE of 26 and is expected to grow EPS by about 7% in FYE Sept 2024 and 9% in FYE Sept 2025. Those estimates may increase some, but that still wouldn't make a value play.
The biggest mistake that investors make about Apple is to not recognize that it isn't valued like a normal stock. It has been performing so well for so long and is so dominant that it is viewed as a safe place to park money, much like a money market fund.
The big issue for the market now is whether the positive response to Apple will spill over to the broad market. Apple, at times, has been a tremendous leader, but that has not been the case for much of 2024. It is rebounding this morning, and because it is such a large component in the indices, it looks like everything is up strongly. However, early in the premarket, only about half of the stocks in the Nasdaq 100 (QQQ) were trading higher. Amgen AMGN and Apple are the biggest gainers.
Even with the early boost from Apple, the S&P 500 is only up about 0.9% and still faces significant technical overhead. It is still lower than it was a week ago, and it needs to regain its 50-day simple moving average of around 5129.
We will see how much Apple can help the broad market, but first we will have to deal with the April jobs report at 8.30 am ET. Nonfarm Payrolls are expected to be around 225,000, and the unemployment rate is expected to be 3.8%.
If these numbers come in hot, then we will see a further pushback in expectations for an interest rate cut this year. The market ignored these delays for a while, but they matter because there are more signs of economic slowing.
The market badly needs a strong positive response to economic news to regain its technical health. At this juncture, it is extremely hard to trust that a bounce will last.
