Johannes Eisele/AFP via Getty Images It’s Apple’s stock market now. The S&P 500 index hit a record high last week, but it’s probably fairer to say that Apple (ticker: AAPL) stock hit an all-time high and the index simply followed. Yes, the S&P 500 closed the week up 0.7% at 3397.16, a new closing high. Apple, however, was responsible for about 60% of the S&P 500’s gain after climbing 8.2% to $497.48 this week. Apple’s influence on the Dow Jones Industrial Average was even starker. The blue-chip benchmark was unchanged on the week, at 27,930. Without Apple, which contributed 259.61 points, the Dow would have fallen 260.30 points, or 0.9%. The Nasdaq Composite, meanwhile, rose 2.65% to 11,311.80. While tech’s role in leading the market higher has been much discussed, including in this space, the singularity of Apple’s rise has not. Consider: Earlier this summer, Apple was battling Microsoft (MSFT) for the title of America’s most valuable stock. Now, it’s not even close: Apple finished the week with a market cap over $2 trillion, while Microsoft’s is “just” $1.6 trillion. The gap is now the widest it has been since Apple became the world’s largest company for the first time in 2012. Everyone has their reason for why this should be, with the most popular being the arrival of the 5G supercycle, which will propel iPhone sales ever higher. That was the reason Wedbush analyst Dan Ives cited this past week when he raised his price target on Apple to $600, 21% above Friday’s close. “We still believe many on the Street are underestimating the massive pent-up demand around this supercycle for Apple,” he wrote. Yet Apple’s rousing success can’t hide the fact that stock market itself isn’t doing so well. The S&P 500 might have hit a record last week, but most stocks have been having bad days. On Friday, for instance, just 220 stocks in the S&P 500 closed higher for the day, and that was far from an anomaly. The S&P 500’s cumulative advance/decline line—a measure of the number of stocks finishing higher versus those finishing lower that technicians use to gauge the market’s underlying strength—has been falling even as the S&P 500 progressed to a record. “It’s more of the same,” says Dave Donabedian, chief investment officer at CIBC Private Wealth Management. “Winners in the last month are the same winners for the last year.” That sounds worrisome, but poor market breadth hasn’t typically been a warning sign for investors, according to Bespoke Investment Group data. In fact, just over 10% of the all-time highs in the S&P 500 since 1990 have come on days with negative breadth. Strangely, the index has gained 13.2% during the year following such occurrences, better than the 11.9% average following all new highs regardless of breadth. “Albeit counterintuitive, weak breadth readings at all-time highs in the past have actually been followed by stronger returns than times in which breadth was positive,” Bespoke’s analysts wrote in a report. Newsletter Sign-up This Week's Magazine This weekly email offers a full list of stories and other features in this week's magazine. Saturday mornings ET. The narrow breadth, however, also reflects what’s happening with the economy right now. And what’s happening is a slowdown from the superfast levels of May and June. After a one-week reprieve, weekly jobless claims rose back above one million; the Empire State and Philadelphia Fed indexes, measures of manufacturing activity in the New York and Philadelphia regions, came in below expectations; and the Fed’s minutes from its July meeting highlighted the economic risks ahead. The week’s strong housing data were the exception. In some ways, it makes sense for the S&P 500 to hit a new high, and then go nowhere. “The market is forward-looking but it’s way ahead of where the economy is right now,” says Nela Richardson, investment strategist at Edward Jones. “The economy hasn’t had time to catch up.” Covid-19 has played an enormous role in that, as the spread of the disease has forced shutdowns and kept people at home even when they were allowed to go out. The one thing that might change that dynamic is a vaccine. While some observers would claim that a successful vaccine is already priced into the market, UBS strategist Keith Parker contends there may be more room to go. He looked at how the S&P 500 performed on days with well-above-normal vaccine sentiment—UBS uses artificial intelligence to crawl the web and determine if mentions about a vaccine are neutral, good, or bad—and found that the S&P 500 returned 1.6% on such days. Comparing changes in the firm’s economic-policy uncertainty measure to the Covid-sentiment gains suggests that only between 33% and 40% of vaccine-related gains are priced in, he says. “This implies the balance of risks is tilted to the upside,” says Parker, who sees a vaccine coming during the first half of 2021. Perhaps. Until then, at least we have Apple. Write to Ben Levisohn at Ben.Levisohn@barrons.com
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