Nothing beats a sincere “good morning” in your Friday inbox. Phil Rosen here, ready to ring in the last day of the week with you.
Let’s start with two things that can make you sound smart during your water-cooler banter today (or bar-stool chit chat tonight).
First, you should know that yesterday’s jobs data surprised markets, with the number of people filing for unemployment falling to a five-month low.
But that’s not necessarily good news to the Fed.
It means policymakers are likely to plow ahead with aggressive rate hikes as the labor market stays hot, making everything from your mortgage to credit card payments more expensive.
Second, you’ll sound like an economics guru if you bring up the UK debt market.
On Thursday, British politicians reiterated their support for a dramatic tax-cut plan, and the UK central bank is still trying to simultaneously tighten and ease monetary policy via buying bonds and raising interest rates.
I said it in yesterday’s newsletter, but the TLDR is that the Bank of England is in a real pickle.
Now that you’ve got your two talking points for the day, let’s turn to stocks — specifically, Apple’s recent sell-off and what it says about the broader market.
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Apple CEO Tim Cook attends an Apple store in Shanghai
Thomson Reuters
1. Shares of Apple dropped roughly 5% on Thursday as Bank of America downgraded the iPhone maker to neutral from buy.
Analysts also lowered Apple’s price objective by 14%, from $185 a share to $160.
“We view the slowdown in services and relatively lackluster iPhone lead times as indicators that consumer spending will slow,” BofA said in a note, adding that weaker earnings and valuation risks may loom.
Thursday marked the second steep loss for the iPhone maker this week. On Wednesday, the stock saw a separate 4% slide on reports that the company shelved plans to increase production for the iPhone 14 this year due to weaker demand than expected.
In addition to acting as a bellwether for consumer sentiment, Apple has been an important part of retail investors’ portfolios over the last few years. According to Vanda Research on Thursday, a deeper sell-off in the stock could be the last straw that forces retail investors to throw in the towel, and the same goes for Tesla stock.
Apple and Tesla account for 34% of the average retail investors’ portfolio. This year, both companies have outperformed the S&P 500 by a healthy clip.
But because of that, any big drop-off in either of their respective stock prices could trigger a wave of selling, Vanda analysts said.
“A positioning puke in these two stocks could be the coup de grace for retail investors’ PnL,” the firm said.
And this week’s Apple sell-off could ultimately spread to Tesla, Vanda says. Then, both mega-cap companies could end up being a drag on the entire stock market.
As Vanda put it: “The danger here is that Apple’s U-turn around its production plans risks causing a significant unwinding of positions, dragging Tesla along on second-round effects.”
Do recent setbacks for Apple point to a wider slump in consumer demand? Email prosen@insider.com or tweet @philrosenn.
In other news:
Vladimir Voronin / AP
2. US stock futures rise early Friday, along with European stocks. Meanwhile, in the UK, Cardano Investment’s Kerrin Rosenberg explained why the Bank of England’s emergency bond purchase program may have prevented a collapse in the country’s pension funds. Here are the latest market moves.
3. Earnings on deck: Alibaba Group Holding Ltd, Carnival plc, and more, all reporting.
4. Billionaire investor Stanley Druckenmiller said owning stocks “doesn’t make a lot of sense” right now. The US economy is heading toward a recession, he noted, and the market is in for a decade of dismal returns. Druckenmiller added that the Dow may be about the same price in a decade as it is today.
5. Russia’s secret expenses top more than $110 billion for next year, as the Kremlin moves to obscure the costs of its war in Ukraine. Moscow is hiding how it plans to use roughly a quarter of its annual budget as it outlines a spending plan for a prolonged conflict in Eastern Europe.
6. Top economists like Paul Krugman and Mohamed El-Erian have berated UK leaders as the recently unveiled spending plan rattles markets. The former dismissed planned tax cuts as “deeply stupid,” while the latter called them “unsettlingly large.” See how some of the biggest market commentators are reacting to the turmoil.
7. China reportedly told state-run banks to prepare for a massive dollar dump and yuan buying spree. Beijing’s previous interventions haven’t been effective in stemming the yuan’s fall in 2022, with the currency on pace for its worst year since 1994. Here’s what you want to know.
8. The US housing market slowdown will last longer than originally expected as pending home sales fall off a cliff. That’s according to the top economist at the National Association of Realtors. He explained why his outlook has changed recently — and what he expects next for mortgage rates and home prices in 2023.
9. Mike Novogratz is committed to betting on crypto but said there’s certain things necessary to successfully navigate the space. In a new book, he shared that he managed to successfully flip an $8 million investment into billions of dollars in crypto. These are the two ways he views digital assets.
Madison Hoff/Insider
10. The bottom half of American families hold just 2% of the country’s wealth. And that’s while the top 1% of households have a third of it. Dig into the numbers here.
Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn).
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.