Why it’s bad news for the entire market when Apple has a big drop

Apple stock is down 8% this week, wiping out about $ 200 billion in value and dragging down the Dow and Nasdaq indexes. The iPhone maker is now officially in the bear market alongside other technology giants.

Apple has fallen during a bad week for equity markets, which are selling off stocks in almost every industry, fears of Fed rate hikes, weakening consumer confidence, rising inflation and global supply chain challenges. The Nasdaq Composite is down 7% so far this week and is on pace for a six-week losing streak.

Apple faces some supply chain challenges, but the outlook for its business has not markedly changed this week.

The company has typically been viewed as a “safe” place for investors to park their money. The fact that it is being sold off of everything else is a bad sign for other stocks, and a sign of deteriorating investor confidence.

Renaissance Macro Research’s Jeff DeGraff told CNBC on Thursday that there is a bear market in there, and that includes Apple.

“For tech, when they start taking the lead in tech, that’s a good sign that they’re going to take everything,” DeGraff said.

“Our assumption is that the AAPL sell-off will continue, not because we know anything about this quarter’s iPhone shipments or services revenue, but because we believe that once investors start selling the best-of-breed names they are rarely done in one day, “said Datatrek co-founder Nick Colas on Thursday.

That trend marks a notable reversal from last November, when growth-heavy tech stocks began to fall and Apple often attracted investors who were seeking a lower-risk bet on tech.

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Apple still has prodigious cash flow, which enables it to endure slowdowns and return to shareholders. The company generated $ 28 billion in operating cash flow in the March quarter of total sales of $ 97.3 billion. It said it spent $ 27 billion during the quarter to repurchase its own shares and pay dividends.

And weakening consumer confidence has not started to hurt iPhone sales – in fact, in the March quarter, every single one of the company’s businesses has grown except for iPads, which Apple blamed on a chip shortage.

When CEO Tim Cook asked about the effects of macroeconomic conditions and inflation on its earnings call last month, he said the company’s bigger problem was making enough iPhones and Macs to meet global demand – not a slowdown in demand.

“Right now, our main focus, frankly speaking, is on the supply side,” Cook said.

But even if Apple were to begin to feel the effects of deteriorating macroeconomic conditions, it is still a rare company with a globally renowned brand, premium profit margins, stores in key shopping centers, and a collection of related products and services that appeal to wealthy. Consumers around the world.

What’s more, if growth slows down, Apple will continue to generate enormous profits and sales – even if it’s no longer the most valuable company in the world.

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