Don’t own any Apple shares? No worries, the iPhone maker stock’s borderline three-month crash is still probably impacting your net worth.
Shares of the tech giant have tanked nearly 20% over the past three months on fears of slowing iPhone production demand and concerns about global economic growth. With sentiment on Steve Jobs’ tech creation at its lowest level in some time, Apple’s market cap has shrunk to $850 billion from the $1 trillion mark it ceremoniously hit on Aug. 2.
Apple’s (AAPL) bellwether status on Wall Street means the company’s performance and outlook is scrutinized even more than other companies. When Apple is viewed as in perfect health — as seen back in August when it reached a $1 trillion valuation — investors take it as Corporate America is firing on all cylinders for whatever reason. Hence, investors are apt to buy stocks in all sorts of companies growing sales and earnings at impressive clips when Apple is believed to be rocking.
The opposite is the case when Apple is perceived to be doing less than stellar, as is now the situation.
“Investing is complicated, and investors therefore love the idea of a bellwether stock as a simplified or distilled guide to what’s going on in the market,” Brown Brothers Harriman Chief Investment Strategist Scott Clemons told Yahoo Finance.
Nuveen Chief Markets Strategist Brian Nick added, “Clearly we’ve seen the pessimism around Apple creep into the larger market and, I think, vice versa. Apple sits at the nexus of a lot of both the major strengths and major weaknesses of the market and the economy at the moment.”
Apple’s size matters
And when Apple catches a cold, it’s sheer size as it relates to the overall stock market means selling pressure could accelerate through different sectors. Investors simply move to sell stocks across the board on fear of contagion from Apple’s sell-off.
Again, this is currently happening as evidenced by pressure in tech names such as Salesforce (CRM) and PayPal (PYPL) that aren’t necessarily tied to Apple’s fortunes or lack thereof. Even retailers like Target (TGT) — fresh off a strong third quarter — are having their stocks beaten amid the ongoing tech rout (which is in large part being fueled by Apple).
Several key stats on Apple courtesy of SunTrust Chief Markets Strategist Keith Lerner for perspective:
At 3.8%, Apple has the largest market cap within the S&P 500.
Apple represents about 5% of the Dow Jones Industrial Average (fifth largest component).
Apple is the largest component of the Nasdaq 100 at 11.7%.
Technology is the largest sector within the S&P 500 at about 20% and Apple is the largest stock within the sector.
Apple also has a sizable weighting in many ETFs, especially tech-focused sector ETFs, such as Technology Select Sector SPDR, where it represents almost 19%.
So, don’t be surprised when you open your 401k statement soon. Just be prepared to blame Apple.
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Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi
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