After stepping back and digesting the past week in the equity markets, it’s easy to fall into the frame of mind thinking about “The Week That Wasn’t.”
Apple (NasdaqGS: AAPL) announced extremely disappointing earnings last Tuesday after the closing bell, and the near term future looked dire not only for Apple’s stock but for the markets in general.
AAPL carryies a 17.98% weighting in the Nasdaq 100 and a lofty 4.54% weighting in the S&P 500 Index (not to mention being the No. 1 component in the SPX by a meaningful margin, #2 weighting is XOM at 3.12%).
SPX futures traded as low as 1321 (regular session lows in the entire month of July were never below 1325) during the overnight session going into Wednesday of last week but stabilized all day Wednesday, and strengthened immensely throughout the week with the SPX ultimately closing at an impressive 1385.97 last Friday (and trading as high as 1389.19).
These are levels in the SPX that have not been touched since prior to the sweeping May 2012 sell-off (remember that?). This said, anyone whom thought they were “lucky” in selling into the small bounce off of the overnight lows post-AAPL earnings on Wednesday, likely spent the weekend crying in their beer after watching the frantic action from last Thursday and Friday in the markets. In fact, we wonder if AAPL had been added as a component of the Dow Jones Industrial Average (which has been a popular notion in the press for at least the past year), with it’s massive $500-$600 handle, would the “market” really have been “up” last week given the fact that AAPL stock falling back $40 to trade as low as $570. The simple mathematics and methodology of the Dow Jones Industrial Average being a “price weighted” index tell us “no.”
We have mentioned throughout 2012 in these recaps the importance of the Technology sector (and particularly AAPL stock with its lofty 17.98% weighting in the NDX) in terms of its relative strength to the broad based markets referenced by the SPX (AAPL +44.47% YTD, NDX +16.19%, SPX +10.59%), and even with AAPL staggering last week post-earnings, to see the broad markets rally to new recent highs is a fantastically encouraging sign for bulls as well as those on the sidelines waiting to move back into the equity markets.