The Tech Industry Gets Hit by Apple's $200 Billion Losses

Equity markets experienced a retreat amid growing apprehension regarding the potential repercussions of China's ban on Apple Inc.'s iPhone on other segments of the American technology industry. Meanwhile, the performance of Treasuries was mixed, and the dollar exhibited limited movement.

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The Nasdaq 100 index saw a decline of approximately 1%, largely influenced by Apple's sharp 7% slide over two days. This decline had the potential to erase more than $200 billion from Apple's market capitalization. Notably, Apple's shares breached the crucial 100-day moving average, a bearish signal for some technical analysts. Concurrently, suppliers of Apple, including Qualcomm Inc. and Micron Technology Inc., also witnessed declines. Other major tech companies, such as Tesla Inc. and Nvidia Corp., recorded losses of at least 2.5%.

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Edward Moya, Senior Market Analyst for the Americas at Oanda, remarked, "The Nasdaq is sinking as one bad Apple spoils a bunch of megacap tech stocks. Apple's growth story is heavily reliant on China, and if the Beijing crackdown intensifies, that could pose a big problem to the bunch of other megacap tech companies that rely on China."

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China has announced intentions to extend its ban on iPhone usage in sensitive departments to include government-backed agencies and state-owned enterprises. This development highlights the escalating challenges faced by Apple in its largest foreign market and global production base. Additionally, Beijing plans to broaden this restriction even further to encompass numerous state-owned enterprises and other government-controlled entities, according to individuals familiar with the matter.

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Andrew Brenner of NatAlliance Securities commented, "We are confident that Apple, who produces a large percentage of their phones in China, will come to some compromise. But that is weighing on both the S&P and Nasdaq."

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In addition to the Apple-related concerns, market participants closely monitored the latest economic data, with robust jobless claims data strengthening the case for the Federal Reserve to maintain higher interest rates.

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Following an initial post-report increase, two-year U.S. yields dipped below 5%, while 30-year bond yields showed a marginal uptick. The dollar exhibited fluctuations after reaching nearly a six-month high earlier in the week.

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Ian Lyngen of BMO Capital Markets noted, "A solid round of employment data that reinforces the perception that the jobs market will remain resilient for the time being. From here, the market will remain wary of corporate hedging-related flows as they have been the biggest driver of price action in U.S. rates thus far in September."

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The euro experienced a decline as the Eurozone's second-quarter growth showed limited expansion. Simultaneously, the onshore yuan depreciated to a 16-year low, reflecting growing pessimism about China's economic outlook.

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Efforts to enhance the stability of the derivatives market were also in focus, with trillions of dollars of derivatives outside the purview of central clearinghouses set to undergo more regular assessments. The International Swaps and Derivatives Association (ISDA), the primary industry organization for the derivatives market, advocated for more frequent margin adjustments by traders to mitigate potential losses from unfavorable bets. ISDA announced that the Standard Initial Margin Model (SIMM) would undergo semiannual recalibrations starting in 2025, transitioning from the current annual recalibrations.

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