Nasdaq Leads Stock Market Decline as Apple Slumps

Early on Thursday, U.S. stock markets exhibited a predominantly downward trend, with the Nasdaq Composite leading the decline. This slide in the markets was attributed to the continued decline in Apple Inc. shares and persistent concerns among investors regarding the Federal Reserve's anticipated need to maintain elevated interest rates as a measure to combat inflation.

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Here's a snapshot of the key market movements at that time:

• The Dow Jones Industrial Average (DJIA) showed a modest increase of 78 points, or 0.2%, reaching 34,522.
• The S&P 500 (SPX) witnessed a decline of 25 points, or 0.6%, settling at 4,440.
• The Nasdaq Composite (COMP) experienced a more significant drop of 199 points, or 1.4%, ending at 13,673.

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The market dynamics were influenced by developments in Treasury yields, which had seen an increase earlier in the week due to robust U.S. economic data. Additionally, the U.S. Dollar Index (DXY) displayed a 0.2% rise.

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Rising yields can diminish the appeal of stocks, while a strengthening dollar can result in higher costs for foreign investors looking to invest in U.S. assets. It can also impact U.S.-based companies by reducing the value of their overseas sales and negatively affect economies reliant on dollar-denominated goods.

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Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, highlighted the global implications of a stronger U.S. dollar, particularly in relation to oil prices, stating, "The U.S. dollar's appreciation adds an additional layer of complexity for the rest of the world, as not only crude prices rise, but the U.S. dollar used to trade oil gains in value as well."

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Despite oil reaching 2023 highs at the beginning of September, there were indications that the U.S. benchmark (CL00, +0.01%) might end its nine-day winning streak.

At the time, the yield on the 10-year Treasury (BX:TMUBMUSD10Y) stood at 4.27%, following Wednesday's close at its fourth-highest level for the year.

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Additionally, upcoming data releases, such as the August consumer-price index scheduled for the following week, were a source of concern for investors.

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The day's data releases highlighted the paradox where good economic news could be perceived as negative for the market. It was revealed that initial jobless benefit claims had decreased by 13,000 to 216,000 for the week ending September 2, marking the lowest level since mid-February. This outperformed economists' expectations, as they had estimated a rise of 2,000 to 230,000. Last week's claims also saw a revision, with a decrease of 3,000 to 229,000, compared to the initial estimate of a 4,000 decrease to 228,000.

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Commenting on this, Mike Loewengart, Head of Model Portfolio Construction at Morgan Stanley Global Investment Office, noted, "We've seen this movie before: Weekly jobless claims once again surprise to the downside, underscoring the labor market's resilience." He emphasized that despite economic deceleration and reduced inflation, employment remained a significant concern for the Federal Reserve. While the Fed might not immediately adjust interest rates, they were unlikely to deviate from their commitment to a higher-for-longer interest rate stance.

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Apple Inc. (AAPL) was a notable underperformer, with shares declining by an additional 4.2%. Renewed concerns regarding the company's business in China were a key driver of this decline. China had prohibited government officials from using iPhones for work, this ban could extend to government-backed entities and state-owned companies. Consequently, Apple shares had fallen by over 7% during the week.

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