- Oil rose and stocks followed yesterday
- Tech is leading on both good days and bad days
- Apple has become a global firewall
It is becoming a pattern. When energy prices go up, the U.S. stock market goes up, but tech goes up most. When oil goes down, the U.S. stock market goes down, but tech goes down least.
As traders creep to their desks today on the 14th anniversary of the 9-11 attacks, as fraught with emotion as Pearl Harbor Day was for their grandfathers, the pattern is holding. West Texas Intermediate rose 3.49% to $45.69/barrel, Brent rose 2.46% to $48.75/barrel, so the Dow (INDEX:INDU) rose .47% to 16,630, the S&P 500 (INDEX:SPAL) was up .53% to 1,952, and the Nasdaq (INDEX:NASDAQ) rose .84% to 4,796.
The rally got an early start, stalled around 10 AM and then got new momentum, especially on the NASDAQ, with a peak at 11 AM, and another around 2 PM. The markets then began falling, and it looked like a nothing day was on offer until around 3:30, when new buyers emerged. After the market closed it was revealed that mutual funds and ETFs continue to suffer net withdrawals, which may be why stocks are falling late in the afternoon.
An Apple a Day
But whether oil is up or oil is down, tech leads. And Apple (NASDAQ:AAPL) leads tech.
Thus much of the talk on the floor involved digesting the previous day’s product announcements from Apple, the most valuable company in the world at a market cap of $625 billion. There were questions about the new Apple TV, jokes about the iPad Pro with its $100 stylus, a feature the late Steve Jobs said his company would never support, but in the end what stood out was the new iPhone 6s line, and the company’s decision to finance purchases directly, rather than having phone carriers do it.
This promise of disintermediation – the idea of carriers being slowly replaced by Apple, even of TV companies being slowly replaced by Apple TV – excited investors over the course of the day, and the shares finally finished the day up 2.2%, up $2.42/share to $112.57. From a post-split low of $56.65 in mid-2013, the stock has now doubled in value, and while it remains 14% below its all-time high of $130, the prevailing view on it is positive.
The Global Firewall
The U.S. action ended what had been a disastrous day in global trading. Japan’s Nikkei lost 2.5%, a third of what it had gained the previous day. Hong Kong’s Hang Seng index fell 2.64%. India’s Sensex lost .38% and the losses then rolled into Europe, with Germany’s DAX down .9%, England’s FTSE down 1.18% and the French CAC-40 down 1.23%.
The day’s biggest disaster came in South America, where Brazil’s Bovespa market fell another .55% as Standard & Poor’s reduced the country’s credit rating to junk status. At one point during the day the country’s Real currency was also down 3.9%, down 31% so far this year, before the central bank intervened to prop up the currency. At issue is a huge scandal surrounding the country’s Petrobras (NYSE:PBR) oil company, which has pushed the approval of President Dilma Rousseff down to near single digits as the scandal approaches her.
So What Happens Now?
A lot depends on what happens to commodity markets. Oil is priced well below production costs for most U.S. companies, which face hard meetings with bankers later this fall, with possible mergers and bankruptcies to follow.
That may be the good news. Anything that takes out supply right now is welcome. If the Fed decides to hike rates next week it could accelerate that process. It could send oil back up over production costs, and that would send a lot of the U.S. market higher.
Meanwhile, buy tech.