Apple stock 'could be the canary in the coal mine' for reopening China: strategist

Apple stock ‘could be the canary in the coal mine’ for reopening China: strategist

Investors curious about the next move in the broader market would be wise to pay close attention to shares of multinational tech giant Apple (AAPL).

“One of the reasons that has helped sentiment, especially in industrial stocks and things like that, is the idea that China is going to reopen,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo. Finance Live (video above). “If there’s another wave of lockdowns in China, it really upsets that story. It upsets the potential for global growth. And so, yes, Apple could be the canary in the coal mine.”

Apple stock has gained about 2% in the past month, underperforming the S&P’s nearly 7% gain.

The COVID-19 situation in China, a key manufacturing hub for Apple, has worsened in recent weeks, impacting the operations of Apple, Tesla and other US-based companies .

China’s COVID-19 cases are hitting record highs as the country moved away from its zero COVID policy, which had boosted optimism in global asset markets.

On Wednesday, the Chinese National Health Commission (NHC) reported more than 28,000 infections nationwide for the day before. That’s roughly equivalent to the 2022 peak in April, according to the NHC.

Apple’s business has come under the spotlight amid the resurgence of COVID-19 in China.

“Apple is too big to ignore,” Sosnick pointed out.

Workers at the Foxconn factory in Zhengzhou, China, a key manufacturing hub for Apple iPhones, clash with authorities. (screenshot)

Violent protests erupted at iPhone maker Foxconn’s flagship factory this week, with protesters smashing windows and clashing with authorities amid tough COVID-19 restrictions.

“Regarding any violence,” Foxconn said in a statement Wednesday, “the company will continue to communicate with employees and the government to prevent similar incidents from happening again.”

If COVID-19 cases continue to rise in China and further lockdowns ensue and weigh on global economic growth, the current move in Apple shares could hint at a broader market pullback soon.

SHANGHAI, CHINA - OCTOBER 13, 2022 - Customers check out the new iPhone 14 series smartphones at Apple Inc's flagship store in Shanghai, China on October 13, 2022. The iPhone 14 series has already seen steep price cuts on e-commerce platforms, with it being the fastest price drop for an iPhone since its release.  (Photo credit should read CFOTO/Future Publishing via Getty Images)

Customers check out the new iPhone 14 series smartphones at Apple Inc’s flagship store in Shanghai, China on Oct. 13, 2022. (CFOTO/Future Publishing via Getty Images)

“After battling macro headwinds and delivering a strong quarter/advice in September in stark contrast to the rest of Big Tech, this latest zero Covid situation is an absolute blow to Apple in its most important holiday quarter” , said Wedbush chief executive Dan Ives. written in a note to customers. “With demand remaining strong over the holiday season, we estimate this to negatively impact approximately 5% of iPhone sales this quarter due to production/supply issues in China. Although not the news that a bull wants to hear from Apple is a supply issue and related to China’s zero Covid policy which is once again a very frustrating situation for Apple (and its investors) but is not not driven by demand.”

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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