Wall Street climbed Wednesday as the Dow and S&P 500 gained, while the Nasdaq turned red as Apple Inc. (NASDAQ: AAPL) tumbled nearly 5 percent a day after unveiling its next-generation iPhones 5S and the new iPhone 5C.
Disappointment over the pricing of the lower-cost iPhone 5C, which comes in several colors starting at $99, weighed on the company's shares as investors feared the phones may be too high and could limit sales in key emerging markets.
“A lot of the rebounds have happened in the past after earnings,” said Mark L. Newton, chief technical analyst at Greywolf Execution Partners from the floor of the New York Stock Exchange.
“The stock had gotten a bit extended, technically, if you look at the history of the stock over the last 12 months,” he said. “We’ve had a 40 percent decline in the stock, and then you had a minor rebound, but technically it just got ahead of itself. So I expect you might be able to pull back further in the next week or two, potentially down to $540 to $550. At least technically that’s an area to try and get involved.”
On Wednesday, shares of Apple fell 5.42 percent to close at $467.83. Apple’s big announcement comes ahead of next week’s highly anticipated Federal Open Market Committee meeting, as Federal Reserve policy officials gather for a two-day meeting on Sept. 17-18 to discuss tapering the central bank’s massive $85 billion-a-month bond-buying program.
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“My own thinking is that the market and the U.S. is gradually going to start to have a bigger pullback and really mirror what’s being seen in emerging markets and in Europe,” said Newton. “So in the next three to five days, yes, I think today and tomorrow you pull back. You probably will still have some upward bias into the Fed next week. You’re seeing defensive sectors under tremendous amount of pressure. Utilities, consumer staples continue to hit new lows in relative terms, that means they continue to lag. They should be under weighted.”
After Apple’s announcement on Tuesday, shares closed below $500, down 2.3 percent to $494.64.
“We’ve seen a little bit of peaking out in energy and technology and that’s a little bit of a concern, but for now the market is still hanging in there,” Newton said. “We haven’t really seen any serious deterioration. So the key thing is, the bottom line, until you see, technically speaking, trends being broken, you want to stay long stock and really buy dips.”
On Tuesday, the tech giant unveiled its iPhone 5S, a new iPhone 5C and the latest version of its new iOS 7 operating system, but disappointment stemmed on concern that the company priced its new iPhone 5C too high to grab enough of the emerging market sector from Samsung and other smartphone rivals that make cheaper phones based on Google's Android operating system.
“Apple’s caught right now in a phase where they’re going from a growth company into a more stable, mature business,” said Newton. “So, you’re always going to see slowdowns. You’re going to see whatever they attempt to do be heavily scrutinized. In this case, they’re saying the phones are too expensive. There’s not enough changes to the new 5S and the 5C. That’s natural. The bottom line is the company still makes a ton of money.”
The world's biggest technology company reported fiscal second earnings that beat Wall Street expectations in July, as Apple reported a profit of $7.47 a share on revenue of $35.3 billion, beating forecasts for $7.32 a share on sales of $35.02 billion.
The tech giant also said it sold over 31 million iPhones during the quarter, though the company reported current-quarter revenue guidance between $34 billion and $37 billion, falling short of analysts’ expectations.
Although Apple narrowly edged past analysts estimates for the quarter, the earnings report spotlighted a growth slowdown for the company in China. Revenue from Apple products in the China region dropped 43 percent from the previous quarter.
Although Apple did not announce a deal with China Mobile on Wednesday as analysts had expected, the tech company has been granted a license to run its iPhone device on China Mobile's network.
“In terms of growth or outlook or in the future, can they come up with interesting products to the extent they’ve had in the past? That’s tough without Steve Jobs being there, and I think that the company’s going to have to figure out new ways of doing that in the future,” said Newton. “But I still like the stock long-term. Near-term, it’s under a little pressure and I think likely this week it’s going to persist for another couple of days.”
The Dow Jones Industrial Average climbed 135.54 points or 0.89 percent, to close at 15,326.60. The S&P 500 gained 5.14 points or 0.31 percent, to end at 1,689.13. The Nasdaq Composite fell 4.01 points or 0.11 percent, to finish at 3,725.01.