Markets Hold Steady Despite Apple’s Slide, Signaling Broader Strength in Equities
Markets Hold Steady Despite Apple’s Slide, Signaling Broader Strength in Equities
By:JJ Kinahan
Crude oil prices spark concern over inflation as they approach key $80 threshold, while regional banks make gains
- The markets are showing resilience in the face of decline Apple’s stock.
- Concern about inflation increases as oil prices near $80 and supply chain cost rises.
- Regional banks outperform with strong earnings, boosting financial sector confidence.
Stocks closed relatively unchanged yesterday but remain on track for their best week since early November. The S&P 500 is up nearly 2% this week, while the Nasdaq Composite has gained almost 1%.
Bond prices have stabilized after falling in four of the last five weeks, offering additional support to market sentiment. However, today’s session is particularly important because it marks a monthly expiration for options, which could lead to elevated trading volume.
Market displays broad resilience
The notable story yesterday was the broad strength in the market despite a significant drop in Apple (AAPL) shares, which fell 4%—their worst day since August. Apple’s decline came after news that it had lost market share in China, erasing $144 billion in market capitalization.
Remarkably, that didn’t weigh down the broader indices, which held steady. This resilience is a positive sign, suggesting reduced concentration risk. Typically, when a market leader like Apple experiences such a sharp decline, the entire market tends to follow. The market’s ability to remain flat instead may indicate a shift toward broader strength.
Skepticism about a China recovery
On the global front, China reported a 5% rise in fourth-quarter gross domestic product (GDP). However, this figure warrants skepticism as it contrasts with other economic indicators that point to struggles, including a real estate crisis. This growth rate appears disconnected from the challenges China faces, raising questions about its reliability.
One under-the-radar development came from JB Hunt Transport Services (JBHT), which reported earnings slightly above expectations. However, the company’s profit margins were squeezed by higher overhead costs, including rising gasoline prices. The stock is down 10% in premarket trading.
This shows how oil prices can ripple through the supply chain, creating inflationary pressure. Oil prices are set to rise for the fourth consecutive week and remain just below the critical $80 per barrel threshold.
Regional banks report gains
Meanwhile, regional banks continued to impress. Truist Financial (TFC) and Regions Bank (RF) both reported better-than-expected earnings, boosting the S&P Regional Banking ETF nearly 7% this week.
Today’s January expiration, which often sees high trading volume because of long-term options expiring, could bring added volatility. Additionally, mortgage rates now exceeding 7% are another headwind for the economy. Bitcoin has climbed back above $100,000 but has struggled to maintain this level. Markets will be closed Monday for Martin Luther King, Jr. Day.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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