Market Recap - Apple Becomes First $1 Trillion Company

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Apple Becomes First $1 Trillion Company

Stocks climbed this week as investors digested the Fed’s latest policy directive and Apple’s (AAPL)quarterly earnings report, which helped boost the company’s market cap above the unprecedented $1trillion mark. The S&P 500 advanced 0.8%, and the tech-heavy Nasdaq rose 1.0%. The Dow lagged though, adding just 0.1%.

The Fed left interest rates unchanged as expected on Wednesday, keeping its target range at 1.75% to 2.00%, and characterized the economy as strong, signaling that the central bank is still on track to raise rates two more times this year. The next rate hike will likely come in September, with the CME FedWatch Tool placing the chances at 93.6%.

Overseas, the Bank of Japan and the Bank of England also held policy meetings this week. The BoJ decided to leave its ultra-loose monetary policy intact, but the BoE voted to raise rates for just the second time in a decade and surprised some by saying it anticipates raising rates further despite the looming uncertainty over Brexit.  

In Washington, President Trump ordered his top trade representative to consider increasing proposed tariffs on $200 billion worth of Chinese goods to 25% from 10%.  Beijing threatened to retaliate with tariffs on about $60 billion worth of American goods. The news didn’t have much impact on U.S. markets, but China’s Shanghai Composite lost 4.6% for the week, retesting a nearly two-and-a-half year low. 

On the earnings front, Apple gobbled up all the attention after releasing its fiscal Q3 results on Tuesday evening.   The world’s largest tech company beat earnings and revenue estimates and issued positive guidance for Q4, helping to restore faith in FAANG names after a disappointing report from Facebook (FB) last week. 

In response, Apple shares rallied 5.9% on Wednesday and then another 2.9% on Thursday, making Apple the first ever company with a market cap of $1 trillion. 

Tesla (TSLA) shares also soared, spiking 16.2% on Thursday, after above-consensus revenues, reaffirmed guidance, and an apology from CEO Elon Musk for last quarter’s abrasive earnings call helped the electric automaker overcome a larger-than-expected earnings per share loss of $3.06.

As for economic data, the July Employment Situation report was released on Friday, showing a below-consensus increase in nonfarm payrolls (157K actual vs 190K consensus). However, the June increase was upwardly revised to 248K from 213K, helping to offset the disappointing headline figure. Average hourly earnings increased 0.3%, as expected, and the unemployment rate ticked down to 3.9%.

The key takeaway from the report is, when accounting for the revisions and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%, it’s essentially the same ‘Goldilocks’ report that the market cheered last month.