{"id":195894,"date":"2023-09-07T09:30:00","date_gmt":"2023-09-07T13:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=195894"},"modified":"2023-09-07T10:39:45","modified_gmt":"2023-09-07T14:39:45","slug":"market-dealing-with-a-big-problem","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/market-dealing-with-a-big-problem\/","title":{"rendered":"Market Dealing with a Big Problem"},"content":{"rendered":"\n<p>The equity market has the biggest problem this morning &#8212; literally. Its most heavily-weighted stock &#8212;&nbsp;<strong>Apple (AAPL)<\/strong>&nbsp;&#8212; is down another 3.7% in pre-market trading.<\/p>\n\n\n\n<p>We say &#8220;another,&#8221; because AAPL dropped 3.6% yesterday on a&nbsp;<em>Wall Street Journal<\/em>&nbsp;report that China is banning iPhone use for officials at central government agencies while working. After the close,&nbsp;<em>Bloomberg<\/em>&nbsp;reported that China is aiming to broaden that ban to state and federal agencies, saying some agencies are telling employees they can&#8217;t even bring their phone to work.<\/p>\n\n\n\n<p>News of these restrictions goes beyond the iPhone, however. The worry for the market is that, if China purposely chooses to make business difficult for a company like Apple, which has a good and important working relationship in China, then it can do so for a lot of other U.S. companies doing business in China. Interestingly, these restrictions come at a time when&nbsp;<em>The Wall Street Journal<\/em>&nbsp;reports that Huawei has introduced a new smartphone to compete with Apple.<\/p>\n\n\n\n<p>For now, Apple investors are understandably worried, knowing that Apple derives about 18% of its revenue from China, according to FactSet. The weakness in Apple, which has a position in the S&amp;P 500, Nasdaq 100, and Dow Jones Industrial Average, is apparent in the futures trade.<\/p>\n\n\n\n<p>Currently, the S&amp;P 500 futures are down 35 points and are trading 0.8% below fair value, the Nasdaq 100 futures are down 199 points and are trading 1.2% below fair value, and the Dow Jones Industrial Average futures are down 100 points and are trading 0.3% below fair value.<\/p>\n\n\n\n<p>Rising interest rates are another headwind. They were lower in overnight action following a trade balance report from China that was better than expected but still signaling weakness. Exports declined 8.8% year-over-year and imports declined 7.3% year-over-year.<\/p>\n\n\n\n<p>Rates, however, shot northward following the initial jobless claims and revised Q2 Productivity reports.<\/p>\n\n\n\n<p>Initial jobless claims for the week ending September 2 decreased by 13,000 to 216,000 (Briefing.com consensus 233,000). Continuing jobless claims for the week ending August 26 decreased by 40,000 to 1.679 million.<\/p>\n\n\n\n<p>The key takeaway from the report is that initial claims &#8212; a leading indicator &#8212; were at their lowest level since February. That is really good news &#8212; economically speaking &#8212; but it is also news &#8212; monetary policy speaking &#8212; that will likely keep the Fed in a restrictive policy position for longer.<\/p>\n\n\n\n<p>The revised Q2 productivity report featured a downward revision in productivity to 3.5% (Briefing.com consensus 3.7%) from the preliminary estimate of 3.7% and an upward revision in unit labor costs to 2.2% (Briefing.com consensus 1.6%) from the preliminary estimate of 1.6%.<\/p>\n\n\n\n<p>The key takeaway from the report is that unit labor costs weren&#8217;t as low as previously reported, so they look disappointing at the headline level; however, they still fit the bill of disinflation given that unit labor costs were up 2.5% a year ago.<\/p>\n\n\n\n<p>The 2-yr note yield, at 4.99% just before the releases, jumped to 5.04% in their wake. The 10-yr note yield, at 4.28% just before the releases, hit 4.31% in their wake. Those moves led to further weakness in the equity futures market, with participants anticipating more weakness for growth stocks sporting premium valuations.<\/p>\n\n\n\n<p>Today&#8217;s open, then, will have a downward tilt. After that, the behavior of Apple and interest rates will be calling the directional shots.<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally Posted September 7, 2023 &#8211; <a href=\"https:\/\/www.briefing.com\/page-one\">Market dealing with a big problem<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The equity market has the biggest problem this morning &#8212; literally. Its most heavily-weighted stock &#8212; Apple (AAPL) &#8212; is down another 3.7% in pre-market trading.<\/p>\n","protected":false},"author":60,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18,6,8,9,26,3],"tags":[14020,3598],"contributors-categories":[13589],"class_list":{"0":"post-195894","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-macro","7":"category-north-america","8":"category-region","9":"category-securities","10":"category-text-articles","11":"category-traders-insight","12":"tag-market-brief","13":"tag-market-outlook","14":"contributors-categories-briefing-com"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Market Dealing with a Big Problem | Traders&#039; Insight<\/title>\n<meta name=\"description\" content=\"The equity market has the biggest problem this morning -- literally. 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