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Stocks Decline Sharply on Rate Hike Concerns

The stock market closed lower on Tuesday as worries on the Federal Reserve’s next interest rate hike continued to affect investor sentiment.

Overall, S&P 500 declined 2% to 3,997, while NASDAQ fell 2.5% to 11,492.

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Chart of the Day

Our chart of the day is the one-year chart of Apple (AAPL) as of February 8, 2023, when the stock was at $152.

Apple designs, manufactures and markets smartphones, personal computers, tablets, wearables. accessories, and related services. Services include advertising on its platforms, AppleCare technical support, as well as the App Store for customers to download applications and digital content such as books, music, games and podcasts. The company also offers payment services including a co-branded credit card Apple Card, and a cashless payment service called Apple Pay.

Apple isn’t growing anymore. Last qtr, profits declined 10% as revenue fell 5% (year-over-year). Management blamed it on three factors: (1) foreign exchange, (2) COVID-19 challenges in China that significantly hurt iPhone 14 Pro and Pro Max supply, and (3) a poor economy. Now, F/X costs might come down this qtr as the USD has weakened, and China’s economy has opened back up as the government has eased its COVID restrictions, but the economic outlook is still weak.

One bright spot was the company hit an All-Time high in Services revenue, with $20.8 billion. The company now has 935 million paid subscribers.

AAPL is part of the Conservative Growth Portfolio. With a P/E of 25, the stock doesn’t have much upside when profit growth is as weak as it is now.

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