Will Apple cont'd falling today & drag US market down?
On Mon, 18 Dec 2023, US stocks edged higher building on a 7-week climb that has been gaining momentum especially since last Wed, 13 Dec 2023, after the Fed’s big reveal.
S&P 500 Index in 2024.
It has been so impactful that financial institutions have all declared a revision to their previous forecasts of where they think the $S&P 500(.SPX)$ index will be at end 2024.
Firing the first salvo was $Goldman Sachs(GS)$ Chief US Equity strategist — David Kostin. (see below)
He has upped projection from the 4,700 level to 5,100 — an +8.5% upwards revision.
Other financial institutions followed suit. (see below)
Other’s predictions are around the 5,000 level.
The most “bearish” prediction came from Bank of America at 5,000 level.
The most “bullish” were from both “Fundstrat” & “Oppenheimer” at 5,200.
These revised forecasts are definitely more “positive” than those I shared last Wed, 13 Dec 2023.
Click here! to find out the previous readings’ estimates. What a difference 7 days make!
US Housing Market index.
Monday also saw the released of the National Association of Home Builders (NAHB) Housing Market index (HMI) report for December 2023. (see above)
This index gauges sentiment & expectations within the single-family home building sector of the US economy.
For December, the HMI increased by +3 points to 37.
This is the first uptick in the index since July 2023’s readings.
Offering cautious optimism for the US housing market.
US Market on Mon, 18 Dec 2023.
All these “positive” news when filtered into the market served to power the US markets’ indexes to another day’s high.
DJIA: 0.0% (+0.86 to 37,306.02). December alone, the Dow is higher by +3.8%.
S&P 500: +0.45% (+21.37 to 4,740.56). The 500 index is 1.2% away from its all-time closing high at 4,796.56 that was reached in January 2022.
Nasdaq: +0.62% (+91.27 to 14,905.19). The Nasdaq 100 registered a new closing high since mid June 2022.
News of the day
Certainly, the above news comes as a shock to a lot of investors, in that the tech giant is actually “riding” on other’s inventions?
More importantly the crux of the issue, might be in commercial sense, about royalties payments?
$Apple(AAPL)$ has informed that they will be holding back sales on the latest 2 versions of Apple watches - Series 9 & Ultra 2, that have a Blood Oxygen feature.
This comes about after two orders issued by the US International Trade Commission (ITC) on 26 Oct 2023 that would restrict Apple’s ability to sell products that use the Blood Oxygen feature after an intellectual property disagreement between Apple and Masimo.
FYI: $Masimo(MASI)$ is a medical technology company, that has its own range of watches offering similar features watches.
Background information.
The saga between Masimo and Apple happened back in 2013 when Apple reportedly contacted Masimo to discuss a potential collaboration between the two companies.
The collaboration did not fall through.
However, Masimo staff (at the detailed discussions) were subsequently poached by Apple through high salaries incentives.
These staff have access to deep wells of trade secrets and information.
This included Masimo’s Chief Medical officer who left in mid-2013, ahead of the debut of the first Apple Watch in April 2015.
In 2020, Masimo filed a lawsuit against Apple in the US District Court in the Central District of California, sued Apple for stealing trade secrets & infringing 10 Masimo patents.
In June 2021, Masimo filed a separate case with the International Trade Commission (ITC), frustrated by the slow pace of the initial district court case.
Masimo has long made medical monitoring equipment for hospitals. The dispute trade secret is its area of domain.
Pulse oximetry itself is very old technology, having been used in hospitals for decades.
However, it relies on a separate emitter and sensor on opposite sides of a finger or earlobe.
Eliminating the need for this was a very significant development, without which the O2 functionality in the Apple Watch Series 6 and later would not be possible.
US court has to determine whether or not Apple has the capability to develop this techology independently is not going to be a trivial task.
On 10 Jan 2023, an International Trade Commission (ITC) judge ruled that Apple has infringed on Masimo's pulse oximeter patents when it launched Apple Watch models that use light sensors to measure the amount of oxygen in the blood.
What are the 2 ITC orders about?
Based on the ITC document, the 2 orders are:
Bars Apple and its affiliates from importing watches that use the Blood Oxygen feature, as well as materials used to make that feature.
A cease and desist, instructs Apple to stop selling the products using the Blood Oxygen feature.
Notes: It is very interesting to note that in ITC order #1, it is about watches. However in ITC order #2, it is no longer referring to Apple watch per se but Apple products (everything that Apple sells).
Effective impact.
Although news reported seemed to infer immediate sales-stoppage, it is anything but.
US customers will still be able to purchase the 2 versions of Apple watches from now until Thu, 21 Dec 2023.
Online sales continue until Thu, 21 Dec 2023 3pm (US time) onwards.
Bric and mortar stores sales will continue until Sun, 24 Dec 2023.
Unfortunately, the devices will remain available for purchase from other outlets including $Amazon.com(AMZN)$ and $Best Buy(BBY)$.
Now what?
This case has been sent to the Biden administration for a 60-day Presidential Review Period.
During this process, President Biden could veto the ruling, although this has not yet occurred.
The Presidential Review Period expires on 25 Dec 2023 and miraculously Apple made a “preemptive” step to comply with the ITC’s decision.
My Viewpoints:
This is a very long-standing case that began 10 years ago.
Befitting the title “David versus Goliath” if you asked me.
To have the gumption and take on a tech giant like Apple Inc with (a) its deep pockets and (b) inifinite resources at its disposal is no mean feat.
It is rare for a president to veto a decision from the ITC.
However, Apple is no stranger to the process.
In 2013, President Obama vetoed a ban on the iPhone as part of Apple’s extended legal dispute with Samsung.
Prior to that, it was in 1987 when President Reagan who vetoed an ITC ban on all products using Samsung semiconductor memory chip imports.
With 25 Dec 2023, 6 days away I am certain Apple is all prepared to appeal against the ITC orders and explore whatever other avenues within its disposal.
As long as the 2 ITC orders are not overturned, the financial impact can already be estimated.
In Q1 2023 earnings, Apple’s wearables business generated $13.48 Billion in revenue.
This will be the possible impact awaiting Apple and its broader supply chain economy.
I am worried that if investors get spooked by the repercussions of the ITC orders and bails, Apple’s fall may drag the US market along with it - due to its “heavy” weightage in the index.
Must Read: Click on below titles to access. Give a like & help to repost ok. Thanks.
Do you think the Biden administration will veto ITC’s orders?
Do you think this will be the end of the fight between Masimo and Apple or will there be more in stall?
Please give a “LIKe”, “Share” and “Re-post” ok. Thanks. Rating is very important (to me).
Do consider “Follow me” and get firsthand read of my daily new post/s ok. Thanks.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Would you consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!