Due to the diminishing hope of a significant interest rate cut by the Federal Reserve within the year and the sharp decline in Apple's (Nasdaq: AAPL) stock price, US technology stocks were significantly negatively affected in the first week of 2024.
On January 5th local time, as of the close of the day, the Nasdaq index rose 13.77 points, or 0.09%, to close at 14524.07 points. The Nasdaq fell 3.25% this week, the largest weekly decline since September last year.
According to the Bloomberg Magnificent 7 Price Return Index, on the 5th, the stock prices of the US tech giants, including Apple, Amazon, Google's parent company Alphabet, Microsoft, Meta, NVIDIA, and Tesla, rose 0.44%. Previously, the index had fallen for four consecutive trading days, with a decline of nearly 3.5%, setting a record for the longest consecutive decline in a month. An analysis suggests that the decline of large technology stocks is also due to investors profiting from last year's upward trend.
This week, the release of employment data caused the market to lower its expectations for a significant interest rate cut by the Federal Reserve in 2024, leading to a decline in the overall market. On January 5th, the December non farm employment report in the United States was released. The number of non farm employees in the United States increased by 216000, higher than the market's expected increase of 175000, compared to a previous increase of 199000.
Paul Ashworth, a macroeconomist at Capital Investment, stated that in reality, the decline in non farm employment in the United States in the first two months means that the growth in December was not as good as it seemed, and it was only concentrated in a few non cyclical industries. However, these data may still lead to further weakening of expectations for the Federal Reserve's interest rate cut in March.
Just the day before, the December ADP employment report for the United States was released, and the number of US jobs unexpectedly rose to 164000, significantly exceeding the expected 125000, with a revised pre employment value of 101000. The ADP report shows that this growth mainly benefits from the increase in employment in the service industry.
At the first monetary strategy meeting of 2024 held by the Federal Reserve on the 3rd, Federal Reserve officials stated that the risk of upward inflation is reduced and it may be appropriate to lower interest rates in the coming year, but the path of interest rates has not been determined, and high interest rates may remain for a longer period of time. The Federal Reserve has not provided any substantial information on the long-awaited "interest rate cut" by the market.
On the other hand, due to consecutive exposure of negative news that was unfavorable to the stock price, Apple's stock price experienced a significant decline this week, which had a significant impact on technology stocks. Since 2024, Apple has been falling for four consecutive days, with its stock price falling more than 5.9% and its market value evaporating over $176 billion.
Foreign media reported on the 5th that the Ministry of Justice is preparing to file an antitrust lawsuit against Apple, possibly as early as this year. Once sued, Apple will face its biggest antitrust crisis in years. It is understood that this lawsuit is aimed at the compatibility between Apple Watch and iPhone, as well as the iMessage service, and may also target the Apple Pay payment system.
This week, Harsh Kumar, an analyst at investment bank Piper Sandler, downgraded Apple's rating from "overweight" to "neutral", believing that Apple's smartphone sales growth rate has peaked, concerned about its excessive smartphone inventory in the first half of 2024, and lowered its target stock price by $15 to $205.
Barclays also downgraded Apple's stock rating from "neutral" to "underweight" on Tuesday and lowered its target price from $161 to $160. Barclays Bank predicts that Apple's stock price may fall by over 15% in 2024. A data released by research firm Counterpoint Research this week also showed that in 2023, Apple's market share in the high-end smartphone market (wholesale prices above $600) decreased from 75% to 71%, while Samsung's market share increased from 16% to 17%, and Huawei's market share increased from 3% to 5%.
In addition, Apple has recently been embroiled in a legal lawsuit, as a patent dispute between the company and medical technology company Masimo has led to a temporary ban on the sale of Apple Watch Ultra 2 and Apple Watch Series 9 with blood oxygen sensor technology in the US market. Currently, this lawsuit is still ongoing.
Another report indicates that the US Department of Justice has launched an investigation into the transaction between Google search engine and Apple's Safari browser, which is also a long-term risk that Apple needs to face. Google is currently facing antitrust lawsuits with the US Department of Justice. Previously, Google confirmed in court that Apple drew over one-third of its search engine advertising revenue. If the court decides to terminate the business relationship between Google and Apple, it may lead to a significant decline in Apple's revenue.
As of the close of the US stock market on the 5th, Apple fell 0.40%, with a total market value of $2.82 trillion; Google's parent company Alphabet fell 0.48%, with a total market value of $1.71 trillion; Microsoft fell 0.05%, with a total market value of $2.73 trillion; Tesla fell 0.18%, with a total market value of 744.168 billion US dollars; Amazon rose 0.46%, with a total market value of $1.50 trillion; Meta rose 1.39%, with a total market value of $904.463 billion; Nvidia rose 2.29%, with a total market value of $1.21 trillion.