Has the “Magnificent Seven” dwindled to the “Famous Five” or even the “Fab Four”? Keeping an eye on the major events of the week, Apple and Tesla’s departure from this year’s tech-driven stock market buoyancy, coupled with their underperformance against the other “Magnificent Seven” megacaps, has become more pronounced.
Apple’s stock faced nearly a 2% decline ahead of Tuesday’s opening after reports revealed a 24% year-on-year drop in iPhone sales in China during the first six weeks of 2024. The U.S. tech giant is encountering intensified competition from local rivals such as Huawei. It’s been a rough week for Apple, with a 3% drop on Monday following the European Union’s imposition of a 1.84 billion euros ($2 billion) fine for impeding competition from music streaming competitors through restrictions on its App Store, marking its first EU penalty for breaching regulations. Apple is now down nearly 10% for the year, lagging behind the Nasdaq 100 and S&P500 by around 16%. While it still shows a 15% increase over the past 12 months, it’s less than a third of the Nasdaq 100’s gains.
Tesla’s stock struggles run deeper amid diminishing demand for electric vehicles and a price war, with its stock plummeting almost 25% for 2024. It experienced over a 7% drop on Monday alone following a decline in February sales in China, possibly due to a slowdown during the Lunar New Year holidays.
Even amid the buzz surrounding artificial intelligence and chipmaking, Google-parent Alphabet hasn’t fared much better, witnessing a nearly 5% decrease for the year. With the equal-weighted S&P500 up 4% this year, this underperformance stands out prominently. Factors like exposure to China’s stumbling economy, the U.S.-China geopolitical standoff, and the upcoming U.S. elections might be contributing to these trends.
In China, mainland stocks saw a slight increase after Chinese Premier Li Qiang announced an ambitious 2024 economic growth target of around 5%, pledging measures to revamp the country’s development model and mitigate risks posed by insolvent property developers and indebted cities. However, concerns lingered in Hong Kong, with the Hang Seng sliding 2.6% and its tech giants tumbling 4.3%.
Tuesday’s National People’s Congress plan revealed China’s intention to increase defense spending by 7.2% this year, contributing to a military budget that has more than doubled during President Xi Jinping’s tenure. On Wall Street, political developments took center stage on “Super Tuesday,” with Donald Trump securing victory in the North Dakota Republican presidential caucuses, reinforcing his grip on the party’s nomination. Trump’s protectionist stance on trade, including the promise of universal 10% import tariffs and bilateral trade tariffs of 60% on Chinese goods if elected, received a boost as the U.S. Supreme Court overturned Colorado’s decision to exclude him from its ballot under a constitutional provision related to insurrection.
Bitcoin’s impressive rally of nearly 60% this year stumbled on Tuesday as it hesitated near 2021’s record high of around $69,000. Microstrategy saw a nearly 9% decline after announcing a private offering of $600 million in convertible senior notes, with proceeds intended for bitcoin purchases. Additionally, S&P 500 and Nasdaq futures were in the red again following a lackluster start to the week.
Advanced Micro Devices dipped around 3% following reports that the chipmaker faced obstacles in its efforts to sell an AI chip tailored for the Chinese market, hitting a roadblock with the U.S. government. With Federal Reserve Chair Jerome Powell’s congressional testimony scheduled for Wednesday, U.S. Treasury yields remained stable, and the dollar index was steady.
Key events for the U.S. markets later on Tuesday include service sector surveys from ISM and S&P Global for February, January factory goods orders, a speech by Federal Reserve Vice Chair for Supervision Michael Barr, and U.S. Treasury auctions for 3- and 6-month bills. Corporate earnings from companies such as Target, Crowdstrike, Greenlight Capital, and Ross Stores may also influence market direction.