The stock market has recently been unable to make new highs. Apple stock is partly responsible.
The Dow Jones Industrial Average and S&P 500 have both failed to move past their all-time highs of late. As of the close of trading on Wednesday, the two indexes were 0.9% and 0.3%, respectively, below the record closing levels they reached on May 7. Since then, stocks have been largely stuck where they are as investors wait for the next factor that can move shares higher.
Apple’s poor performance hasn’t helped. The stock is down 1.8% year to date. Apple is regarded as a growth technology stock, a category that has underperformed the broader market this year. The Nasdaq Composite, known for its exposure to tech, has gained 4.5 percentage points less than the S&P 500 in 2021.
That is partly because bond yields have risen. Higher yields, and higher interest rates in general, erode the current value of future cash flows. That is a particular problem for growth stocks because the bulk of the cash they will pump out is expected to arrive years from now.
Apple’s performance caused marginal pain for the Dow. The stock’s performance subtracted almost 40 points, or 0.1% from the Dow, as of Tuesday’s close. If Apple shares were flat for the year, the index would have closed Tuesday at a level 0.1% higher than it actually did.
The stock’s impact on the S&P 500 has likely been worse. Apple’s market $2.12 trillion capitalization accounts for 6% of the $35.78 trillion aggregate market cap of the S&P 500, according to FactSet data, making its weighting in the index particularly high.
Some investors are waiting to hear from the Federal Reserve to see if policy makers’ latest views on rates and the economy can move the major indexes higher. A run upward by Apple would also do the trick.
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