The recent economic news has caused the rally from October lows to stall, leading markets into a new phase. Despite a breakdown in the S&P 500's upward trend, it is still significantly above previous peaks. This shift in sentiment presents opportunities for investors.
It will take a few days for markets to digest recent economic news , but it was clear before any announcements were made this week that the rally from October lows had stalled, and markets have now entered a new phase.
We can see from Apple’s chart it has been range bound for almost a year with a high near a psychological resistance level of $200, and a low near $165, where up until yesterday, it found itself trading near. Not surprisingly, the stocks relative performance against the S&P 500 and the Technology Select Sector SPDR® Fund over the last six months has fallen off a cliff, but at least there are buyers willing to defend the current price level.
With any potential outcome of the DOJ suit unknown, any financial penalty will likely be brushed off relatively easily given the cash-generating power of the company. The €1.8 billion fine from the EU is just a drop in the ocean for the company and it can now move on. Operationally, if the AppStore has to become more open or flexible to third parties it may present new opportunities and/or attract existing Android users to switch to Apple.
Where Apple does shine is on its Return on Assets, at 29.5% it’s comfortably above peer Tech giants and it sits on a pile of cash.
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