With stocks at record highs, traders are looking to Apple to help extend the market rally Tuesday.
But if history is a guide, Apple has a good chance of heading lower.
Apple is expected to unveil its widely anticipated iPhone X model, iPhone 8 models, a possible new Apple Watch and other products at a 1 p.m. ET event, at the Steve Jobs Theater in Apple Park, its new Cupertino campus.
Apple shares rose ahead of the announcement of its 10th-anniversary phone, gaining 1.8 percent Monday to $161.50.
“We’ve seen many times when the Apple stock rallies into the unveiling of a new phone, and after that it sells off or consolidates,” said Peter Boockvar, chief market analyst at Lindsey Group. “Apple is up almost 40 percent this year. If history is any guide, it sells off on the news. â€¦The bar is very high here for Apple to deliver. To get a market cap stock up this big, up 40 percent this year, takes a lot. Now it has to deliver.”
According to a CNBC study, Apple stock was lower 75 percent of the time on the days it made iPhone announcements. For the 11 instances, the stock finished flat on average, with a gain of 0.04 percent. But on the day after, the stock did much better, gaining 60 percent of the time with an average gain of 0.6 percent.
“It’s Apple-specific. It will only have an influence because of the size of its market cap, nothing more than that,” said Boockvar. The Dow, S&P 500 and Nasdaq all rallied more than 1 percent Monday. The S&P 500 rose to a new closing high of 2,488, a 1.1 percent gain and its best daily performance since April 24.
“I guess the thing with Apple is, I don’t think it’s going to have a lasting impact, but it certainly could have trader impact, headline impact,” said James Paulsen, chief investment strategist at Leuthold Group.
The biggest market cap stock at $834.2 billion, Apple has an unusually strong hold over the stock market. As a member of the Dow, S&P and Nasdaq, it can also sway marketwide sentiment.
“As far as tech is concerned, Apple is cheap relative to the tech sector. If it rallies that would be good for the overall technology sector,” said Paul Hickey, co-founder of Bespoke. Companies in Apple’s supply chain also rose Monday, including Qualcomm, Jabil, Analog Devices, Glu Mobile and Micron, and they could move again with Apple Tuesday.
This time, Apple enters an iPhone announcement with momentum even before the release of its new products. The new X iPhone, supposedly the biggest upgrade in a decade and reported to cost $1,000, is also expected to be in short supply initially.
“As far as the iPhone is concerned, it’s been gaining share all year long. It’s got solid momentum, so people are moving to Apple even before the iPhone is coming out,” said Hickey. According to Bespoke, iPhone ownership has been increasing over the last three months across income levels.
Purchases by consumers in the 25-to-34-year-old bracket have been surging, and ownership levels have been increasing for all age groups below 75 years. There are also many iPhone users who are ready to upgrade, with just 28 percent of users having the latest model, 7s, according to Bespoke.
“I think expectations are very high as they always are for Apple, but they always seem to deliver,” said Jack Ablin, CIO of BMO Private Bank. “It’s a company that tended to over-deliver, and I think the 10-year anniversary is meaningful. That’s like 70 in tech years.”
As for the stock market, its gains could be impervious to a disappointing Apple announcement. Stocks rallied Monday after Hurricane Irma’s impact was much less than feared for Florida. There was also relief that North Korea chose to celebrate its founding with a party over the weekend, rather than an anticipated missile launch.
“This sort of brings to light to me at least that underneath the stream of all the bad news, whether it’s government, hurricane, geopolitical, nuclear war, underneath that, it’s an awful good fundamental underpinning. It’s basically an economy that’s doing well,” said Paulsen.
“There’s a lot to like in the sense that we’ve got very low yields, very low inflation and solid real growth, and the likelihood of it accelerating,” said Paulsen.
Besides Apple’s big event, the annual Delivering Alpha conference is on Tuesday. The conference is produced by CNBC and Institutional Investor. Speakers include a roster of heavyweight investors, as well as Treasury Secretary Steven Mnuchin at 8:30 a.m. ET and JPMorgan CEO Jamie Dimon at 3 p.m.
On the data front, the NFIB small-business survey is released at 6 a.m., and JOLTs data on job openings and turnover are released at 10 a.m. ET.
There is also a $20 billion 10-year note auction at 1 p.m. ET.