US Close: Buy the dip, Apple Warning, King Dollar

It didn’t take long for investors to go back to the buy-the-dip playbook. US stocks are only a few percentage points away from record highs on optimism the latest COVID variant won’t completely upend economic activity. Risk appetite was dealt an early blow on reports that Apple’s iPhone demand was waning before the peak holiday shopping season was over. The next couple of weeks will be key in assessing the impact of Omicron. So far, the first two Omicron cases in the US have one person with mild symptoms, while the other one has already recovered. The US already has 70.4% of the population vaccinated and if Omicron does not lead to more severe illness than Delta, we could only be looking at a minimal impact to the short-term outlook.    

Apple

An unexpected Apple warning sent shares of the iPhone maker down sharply as demand for its latest phone appears to be slowing. Apple shares fell 4.2% immediately after the Bloomberg report of weakening demand, which has yet to be confirmed by Apple. The gift of iPhone during the holidays appears to be losing momentum, but that might be in large part why many people bought it early to have the new phone to take pictures this holiday. Raymond James analyst Caso countered the weakening demand report, by noting “Our own checks haven’t uncovered significant changes thus far.”  Apple is now down only 1%.

FX

It is no surprise that leverage funds are continuing increasing their dollar bets after Fed Chair Powell’s hawkish turn and some flight-to-safety into Treasuries. Demand is still very strong for Treasuries and that story won’t change given how desperate some investors are for yield. The dollar is slightly higher on the day as investors buy the stock market dip and as the Treasury yield curve continues to flatten.  

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