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Pre-Market Actions: Can New iPhones Benefit From Apple’s Spectacular Run?


If you ask Wall Street, the answer is a resounding yes.

Remember: the iPhone 12, the first to come with 5G capability, was a huge success. In its most recent quarter, Apple reported an almost 50% year-over-year increase in iPhone sales to $ 39.6 billion.

“We continue to be encouraged by the response from our customers to the iPhone 12 line,” CEO Tim Cook told analysts in July. “We are still in the early days of 5G.”

That said, there are a lot of unknowns, including the cost of the iPhone 13 and the timing of its launch.

“Price is the most important variable,” Bank of America analysts Wamsi Mohan and Ruplu Bhattacharya wrote in a research note.

Supply chain issues that could delay iPhone shipments also pose a risk.

“With discussions of supply constraints already prevalent in the industry, there are concerns about a delayed product cycle,” JPMorgan’s Samik Chatterjee and Joseph Cardoso told customers.

Apple recently suffered a series of negative headlines. On Monday, the company released an urgent iPhone software update to fix a vulnerability in iMessage that independent researchers said allowed spyware to infiltrate devices without users clicking a link.
And last Friday, a U.S. judge ordered Apple to change its policies on the App Store following a lawsuit filed by Epic Games, the maker of Fortnite. The company is no longer allowed to ban developers from adding links in their apps to external payment options, although the decision is likely factored into the appeal process.

“This opens up the possibility for developers to trick customers into bypassing Apple’s payment system, which would reduce Apple’s net dollar revenue from the App Store,” the Bank of America team said. .

However, these developments are ultimately less important to Apple’s share price than the launch of the company’s new products.

“The most important thing fundamentally remains hardware sales,” Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, told CNN Business.

Importantly, the judge in the Epic Games case also said she couldn’t decide Apple is a monopoly, which could allay some fears about other antitrust efforts against the company.

Watch this space: The Wall Street consensus is clearly that Apple stock still has a way to go. Of 44 analysts who monitor the company, 35 have buy ratings, while the other nine are neutral, according to data from Refinitiv. No analyst recommends that their clients sell stocks.

But that doesn’t mean the gains will come all at once. Bank of America points out that Apple shares are typically down the day after their iPhone was revealed, but recover 30 to 60 days later.

New data will offer hints on inflation

Shares hit a record high after a record high this year. But investors have failed to shake off the nasty feeling that inflation could get out of hand, hurting economic recovery from the pandemic.

The latest: New data arriving on Tuesday could allay some of these concerns. Last month’s US consumer price index is expected to show prices rose 0.3% in August, down from 0.5% in July and 0.9% in June.

This could reassure Wall Street that some supply chain issues are starting to resolve, reducing the upward pressure on prices. Yet it could also be a sign that the recent boom in consumer demand that propelled the US economy is starting to run out of steam.

How the Federal Reserve interprets the data ahead of its meeting next week will be key. The central bank is wondering when to start pulling back its massive bond buying program before it finally begins to raise interest rates to their all-time lows.

Jeffrey Sacks, head of investment strategy for Europe, Middle East and Africa at Citi Private Bank, told me the bank thinks the Fed will make an announcement on reducing asset purchases. in November before starting the process in December.

Majority Opinion: Most investors agree. In Bank of America’s most recent survey of global fund managers released Tuesday, 84% of respondents said they expected a decline “by the end of the year.”

Fed Chairman Jerome Powell has made it clear that central bank decisions depend entirely on data. A month of CPI data won’t reveal whether inflation is transient, as the Fed expects, but could point the direction of travel.

The alarm bells ring for Chinese Evergrande

In a recent edition of Before the Bell, we warned that investors should keep a close eye on Evergrande, the struggling Chinese real estate giant. Take this as a repeated warning.

On Tuesday, Evergrande again stressed that it could default on its massive debts as it struggles to cut costs and find buyers for some of its assets. In recent weeks, the developer has warned of a cash crunch, listing $ 300 billion in total liabilities and expressing the urgent need to raise funds.

In a Hong Kong stock exchange file, Evergrande also said it had called in financial advisers to “assess the group’s liquidity and explore all possible solutions” as quickly as possible.

Remember: if Evergrande were to default, the effects would spill over into the entire Chinese banking system. Subsequent efforts to curb the country’s indebted real estate developers could also weigh on the country’s economy at a delicate time.

On the radar: The region’s markets quivered on Tuesday. The Shanghai Composite closed 1.4% lower, while the Hong Kong Hang Seng lost 1.2%.

Evergrande shares, which were already in free fall, plunged another 12% in Hong Kong. They have fallen by 80% since the start of the year.

Following

The U.S. Consumer Price Index for August is posted at 8:30 a.m. ET.

Coming tomorrow: Energy Information Administration data on U.S. crude inventories comes in as West Texas Intermediate futures are trading near $ 71 a barrel.

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