Apple’s Price Target Reduced
On Tuesday, Jefferies trimmed Apple Inc.'s (AAPL, -5.02%) price target from $135 to $130. This came as a result of the tech giant’s exposure to China which moved on Tuesday to devalue its currency. According to Jefferies analyst Sundeep Bajikar, the reduced price target takes into account the future of the iPhone in China as well as the loss of confidence among investors of Apple’s ability to grow. Despite this, Bajikar maintained a hold rating on Apple’s stock. In recent trade, the share price of Apple traded at $115.45, down 3.5 percent. This drop put Apple on track for its 3rd decline of more than 3 percent in the last month. Of the 30 components which make up the Dow Jones Industrial Average (DJIA), Apple has the 2nd most exposure to China. This is since more than 16 percent of Apple’s revenue is derived from this region. Interestingly, according to FactSet, last month China surpassed the U.S. as the world’s largest market for the iPhone. Bajikar also stated that while Apple is likely to be able to increase their market share in China, unless the company is able to deliver progress through new product categories as well as increase cash returns to their investors, Apple will be held ransom by the China-iPhone sentiment in the short term. Apple is currently trading at $113.54 a share.
In U.S. trading on Tuesday, stocks traded lower. This came as the Dow Jones Industrial Average (DJIA) declined by more than 200 points which was caused by a surprise move by China, the world’s second largest economy, to devalue the yuan. This move prompted analysts to start questioning how the economy in the U.S. will cope should the Federal Reserve increase interest rates. At the close of trading, the DJIA dropped 1.4%, or 242 points, to 17,373. This decline pushed the blue chip index into bearish territory. That is, the index’s 50-day moving average fell below the 200-day moving average, which is referred to as the ‘death cross’. This last occurred to the Dow index in late 2011. Also on the downside was the tech heavy Nasdaq Composite Index (COMP) which declined 1.4%, or 72 points, to 5,030, while the S&P 500 index (SPX) lost 1.2%, or 25 points, to 2,079.
On Tuesday, the U.S. dollar pared losses in a volatile trading session. This came after data showed that the unit labor costs in the U.S. increased by more than expected in the 2nd quarter. In addition, the non-farm productivity came in below expectations. According to the Bureau of Labor Statistics, in the 3 months to June, the unit labor costs increased by 0.5%, missing expectations for a gain of only 0.1%. Meanwhile, the data also showed that the productivity in the nonfarm business sector increased by 1.3% in the second quarter. This also missed expectations for a 1.6% gain. The greenback did gain earlier in the trading session as a result of China which devalued the yuan. This move was made in order to assist exporters after the recent release of poor economic data. The EUR/USD traded at 1.1039, up 0.20% while the USD/JPY traded at 124.89, up 0.22%. Against the currencies in Switzerland, Canada and Australia, the U.S. dollar traded higher with the USD/CHF up 0.14% at 0.9848, the USD/CAD up 0.92% at 1.3120 while the AUD/USD was down 1.67% and trading at 0.7287. The U.S. dollar index held steady at 97.25.
Crude oil prices declined to a 6-year low on Tuesday. This came in response to concerns regarding the global supply glut as a result of bearish data which was released by OPEC earlier in the session. According to OPEC, the current output will not be cut while production increased moderately to remain at its highest level in more than 3 years. Last month, the output from Saudi Arabia dropped by 0.2 million barrels per day to 10.4 million bpd. Meanwhile, OPEC increased the overall output by 100,000 bpd to 31.5 million bpd on the month. WTI crude oil for delivery in September traded at $43.13 a barrel, down 4.06%, or $1.84, on the NYMEX. Also, Brent crude oil for September delivery traded at $49.70 a barrel, down 2.59%, or $1.32, on the Intercontinental Exchange (ICE).