Stock Market Resumes Sell-Off After Brief Relief Rally, Apple Shares Slip After Downgrade

The stock market is back in free-fall after a brief rally. Apple's stock got downgraded by the Bank of America, sending tech stocks into a spiral. Meanwhile, central banks seem to be winging it.

The stock market tried to mount a rally yesterday to break a series of disappointing closes but to no avail. This morning, the three major indexes are in sell-off mode once more, dragging the US stock market down as investors weigh their options. The threat of a recession grows more realistic every day, and many investors and analysts are now considering the best options to safeguard their assets in the event of a slowdown.

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Shares of Apple fell this morning after Bank of America issued a rare downgrade to the company’s stock outlook. Bank of America analysts reduced their rating on Apple from “buy” to “neutral” after a Bloomberg report indicated that Apple had told suppliers to not expect a large demand for chips needed to create the iPhone 14. This sudden drop in interest for an Apple handset is unusual and would underscore an overall lower consumer demand for luxury goods in the broader economy.

Read More: Check out the latest Mind Your Dollars stock and financial news.

Investors on Wall Street are now anxiously watching the major central banks in the US, UK, and beyond. These regulatory entities have been aggressively pursuing policies to help reduce demand and curtail inflation. However, these quantitative tightening measures could trigger a recession on their own, creating a harsher economic environment for everyone–including working-class people.

Stocks Down After Brief Rally

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The relief rally was nice while it lasted. This morning, the S&P 500 dropped a stomach-churning 2.2% after its brief recovery yesterday. The Dow Jones Industrial Average saw the smallest drop-off but still sank an uneasy 1.7% shortly after the start of trading. The tech-heavy Nasdaq Composite lost 3%, suffering the steepest sell-off of the three indexes and highlighting investor uncertainty regarding tech shares. 

Much of the Nasdaq’s sell-off could be attributed to the Bank of America analysts downgrading Apple’s stock from “buy” to “neutral.” If there’s less demand for Apple’s luxury smartphones, then there might just be less demand for tech, in general, going into the typically-busy holiday season. If this is the case, investors want nothing to do with the high-risk tech sector right now.

The drop-off coming only a day after investors saw the major indexes all jump by around 2% is confusing for many. Gregory Daco, EY Parthenon’s Chief Economist, says “the absence of proper policy coordination along with the speed and synchronization of rate hikes” creates an “excessive and disorderly tightening of financial conditions.”

Apple Shares Dropping After Downgrade

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Tech investors are easily spooked. The tech industry is famously high-risk and high-reward, and as such, shareholders are quick to shuffle their assets around at the first sign of trouble. One such indicator right now is that Apple is apparently lowering its orders for chips required to manufacture the iPhone 14. 

“We view the slowdown in services and relatively lackluster iPhone lead times as indicators that consumer spending will slow,” explains a team of analysts at Bank of America. In this case, the team is using the iPhone as a bellwether to see the demand investors can expect during the holiday season. Typically, working-class Americans spend more money on luxury goods like smartphones and game consoles in the final three months of the year as they ramp up their shopping to buy gifts for family and friends.

Apple’s share price dipped by around 4.5% this morning after the news broke. The analysts also noted they expect to see Apple’s stock price fall from $185 to $160 per share, a dramatic rebalancing that would indicate a tough quarter for the Cupertino-based tech giant. Some analysts rebuffed the downgrade, however, with Rosenblatt Securities’ analysts noting that in the past few years, there’s been “a recent history of comparable reports proving to be misleading when actuals come out.”

Central Banks Remain Troubling for Investors

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Investors are currently worried about the global economy due to pressures from all angles of the macroeconomic picture. One of the most pressing and direct concerns for shareholders is the ongoing chaos created by central banks like the Federal Reserve and Bank of England. And it’s not just these two; banks around the world are making unprecedented moves to strengthen their national currencies.

The Swedish Riksbank recently authorized a 100 basis point rate hike, the first in that country’s history. The Bank of Japan has implemented a new sweeping financial policy to shore up the yen. This, combined with the Fed’s seemingly endless appetite for interest rate hikes and the Bank of England’s confusing new policies, has investors anxious for a return to normal. 

Notably, the Bank of England is performing a strange double policy, implementing an unlimited bond-buying program while simultaneously hiking interest rates to curtail runaway inflation. “If the U.K. appears to be engaging in two distinct, opposing monetary experiments, that’s because it likely is — all in the name of expediency,” writes Yahoo Finance analyst Jared Blikre. Such an experiment could backfire badly, all while the pound sterling is 25% down against the dollar this year.

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