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Stocks Close Mixed Anew as Rates Are Kept Steady

The stock market was mixed on Tuesday, although S&P 500 exceeded the 5,400 level for the first time. It rose 0.9% to 5,421, while NASDAQ increased 1.5% to 17,608.

Meanwhile, the Federal Reserve held rates steady, as expected. It also signaled that it only sees one rate cut this year. Note that in early 2024,, the central bank projected three rate cuts.

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Chart of the Day

Here is the ten-year chart of Apple (AAPL) as of May 14, 2024, when the stock was at $187.

Apple is getting a lot of hype over AI opportunities. Some analysts and investors see a once-in-a-decade upgrade cycle that could bring new life into a stock that has lost its momentum.

Bank of America just published a research report saying new iPhones will utilize advanced machine learning, superior personal assistance, language processing, health monitoring, photography, security, battery management, visual experiences, and vacation planning. In addition, new apps that will utilize AI could be subject to Apple’s Services “tax”.

However, David Sharek does not believe the hype, and a reason why is lackluster profit growth. Last quarter, the company reported a mere 1% gain in year-over-year profits as revenue declined 4%. For now, Apple does not have any catalysts to move higher. The Vision Pro is not moving the needle, and the company does not have compelling AI to boost revenue. Instead, management just declared a $110 billion stock buyback program. That will help boost earnings per share (EPS) but he would rather see that money deployed into new technologies or products.

AAPL is on the radar for the Conservative Growth Portfolio. We sold the stock last quarter when the Vision Pro was not a catalyst, and now we will wait and see if this AI hype becomes a reality.

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