Apple stock 'could be canary in coal mine' for China reopening: Strategist

Investors curious about the broader market’s next move would be wise to pay extra attention to shares of multinational technology giant Apple (AAPL).

“One of the reasons that’s helping sentiment, especially in industrial stocks and things like that, is the idea that China is going to open up again,” Interactive Brokers chief strategist Steve Sosnick said on Yahoo Finance Live (video above). “If there is a new wave of lockdowns in China, that really turns this story around. This reverses global growth potential. So, yes, Apple could be the canary in the coal mine.”

Apple shares have gained about 2% in the past month, underperforming the S&P’s gain of almost 7%.

The COVID-19 situation in China, a key manufacturing hub for Apple, has worsened in recent weeks, affecting the operations of Apple, Tesla and other US-based companies.

China’s COVID-19 cases surged to record highs just as the country was moving away from its zero-Covid-19 policy, which had fueled optimism in global asset markets.

On Wednesday, China’s National Health Commission (NHC) reported more than 28,000 infections across the country in the previous day. That’s roughly equivalent to the 2022 peak in April, according to the NHC.

Apple’s business has come under the spotlight amid China’s resurgence of COVID-19.

“Apple is too big to ignore,” Sosnick stressed.

Workers at the Foxconn factory in Zhengzhou, China, a key manufacturing hub for Apple's iPhone, have clashed with authorities.  (screen shot)

Workers at the Foxconn factory in Zhengzhou, China, a key manufacturing hub for Apple’s iPhone, have clashed with authorities. (screen shot)

Violent protests erupted at iPhone maker Foxconn’s flagship factory this week, with protesters smashing windows and clashing with authorities amid strict COVID-19 restrictions.

“Regarding any violence,” Foxconn said in a statement Wednesday, “the company will continue to communicate with employees and the government to prevent similar incidents from happening again.”

If COVID-19 cases continue to rise in China and further lockdowns follow and weigh on global economic growth, the current move in Apple shares could hint at a broader pullback in markets soon.

SHANGHAI, CHINA - OCTOBER 13, 2022 - Customers experience the new iPhone 14 series smartphones at Apple Inc's flagship store in Shanghai, China, October 13, 2022. The iPhone 14 series has already seen a sharp price drop on e-commerce platforms, with this is the fastest price drop for an iPhone since its launch.  (Photo credit should read CFOTO/Future Publishing via Getty Images)

Customers experience the new iPhone 14 series smartphones at Apple Inc’s flagship store in Shanghai, China, October 13, 2022. (CFOTO/Future Publishing via Getty Images)

“After battling macro headwinds and delivering a strong September quarter/guidance in stark contrast to the rest of Big Tech, this latest zero-Covid situation is an absolute blow for Apple in its all-important holiday quarter,” Wedbush managing director Dan Ives wrote in a note to clients. “As demand remains steady during the holiday season, we would estimate that this will negatively impact around 5% of iPhone sales this quarter based on the affected manufacturing/supply issues in China.” While not the news every bull wants to hear from Apple, this is a supply issue and related to China’s zero Covid policy, which is a very disappointing situation for Apple (and its investors) again, but not driven by the search.”

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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