Apple stock ‘could be the canary in the coal mine’ for China reopening: strategist

Investors curious about the next step in the broader market would do well to pay extra attention to shares of multinational technology giant Apple (AAPL).

“One of the reasons that has helped sentiment, particularly in industrial stocks and things like that, is the idea of ​​China opening up again,” Interactive Brokers chief strategist Steve Sosnick said on Yahoo Finance Live (video above). “If there’s another wave of lockdowns in China, it will really turn that story on its head. It’ll turn the global growth potential upside down. And so, yes, Apple could be the canary in the coal mine.”

Apple stock is up about 2% over the past month, underperforming the S&P’s nearly 7% gain.

The COVID-19 situation in China, a major manufacturing center for Apple, has worsened in recent weeks – impacting the business of Apple, Tesla and other US-based companies.

China’s COVID-19 cases are rising to record highs, just as the country moved away from its zero-COVID policy, which had sparked optimism in global asset markets.

On Wednesday, China’s National Health Commission (NHC) reported more than 28,000 infections across the country for the previous day. That’s roughly equivalent to the April 2022 peak, according to the NHC.

Apple’s business has been thrust into the spotlight amid the resurgence of COVID-19 in China.

“Apple is too big to ignore,” Sosnick stressed.

Workers at the Foxconn factory in Zhengzhou, China, a major production center for Apple iPhones, clash with authorities.  (screenshot)

Workers at the Foxconn factory in Zhengzhou, China, a major production center for Apple iPhones, clash with authorities. (screenshot)

Violent protests erupted at iPhone maker Foxconn’s flagship factory this week, with protesters smashing windows and clashing with authorities amid tight COVID-19 restrictions.

“With regard to violence,” Foxconn said in a statement Wednesday, “the company will continue to communicate with employees and the government to prevent similar incidents from happening again.”

If the number of COVID-19 cases in China continues to rise and further lockdowns weigh on global economic growth, the current move in Apple’s stock could point to a broader pullback in markets soon.

SHANGHAI, CHINA - OCTOBER 13, 2022 - Customers experience the new iPhone 14 series smartphones at Apple Inc's flagship store in Shanghai, China, October 13, 2022. The price of iPhone 14 series has already fallen sharply on e-commerce platforms , with this being the fastest price drop for an iPhone since its release.  (Photo credit must read CFOTO/Future Publishing via Getty Images)

Customers experience the new iPhone 14 series smartphones at Apple Inc’s flagship store in Shanghai, China, October 13, 2022. (CFOTO/Future Publishing via Getty Images)

“Having battled macro headwinds and delivering a strong September quarter/advisory that stands in stark contrast to the rest of Big Tech, this latest zero-Covid situation is an absolute blow to Apple in its most important holiday quarter,” Wedbush Managing Director Dan Ives wrote in a note to clients. “As demand remains firm over the holiday season, we estimate that this will negatively impact approximately 5% of iPhone sales this quarter based on the affected manufacturing/supply issues in China. While this is not the news that a bull wants to hear from Apple, it’s a supply problem and related problems to China’s zero Covid policy, which is again a very frustrating situation for Apple (and its investors), but not demand driven.”

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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