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A Bifurcated Day

Markets were bifurcated as the Dow was unchanged and the NASDAQ led by be technology shares retreated about 1.0% amid concern over how a Chinese ban on AAPL’s iPhone could impact other segments of the technology industry.  Apple, the technology behemoth, has shed about $200 billion in market cap in two days according to Bloomberg.

The amount Apple shares have declined is more than the value of NFLX and about the same capitalization of McDonalds.  Writing it differently, AAPL lost more capitalization than the net worth of 468 members of the S & P 500.

Markets were also spooked by jobless claims which fell to the lowest level since February, adding to evidence of a resilient labor market in the face of a very aggressive Fed.  Claims were lower than all forecasts in a Bloomberg survey of economists.

A major issue at hand is that everyone already owns the 5-7 mega sized technology firms and when selling starts who is left to buy the shares.  Recently AAPL and MSFT were worth an incredible 8% and 7% of the S & P 500, respectively.

There has never been a concentration of monies in several companies or one sector.  It has created a very imbalanced market. 

The Treasury market initially sold off on the jobless claims but later retraced most of the drop, perhaps believing jobless claims may have been distorted by Hurricane Idalia.  The rebound in prices did not lend to a rally for the technology sector.

What will happen today?

Last night the foreign markets were down.  London was down 0.07%, Paris down 0.01%  and Frankfurt down 0.28%..  China was down 0.,18% Japan down 1.16% and Hang Seng closed.

Futures are bifurcated as Dow futures are flat and NASDAQ futures down 0.40%.  The 10-year is off 2/32 to yield 4.26%.

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Kent Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.