Will Apple Stock Keep Rising? Without a Relief Bill, It Could

Apple CEO Tim Cook

After opening lower, stocks are trading flat this morning in response to better-than-expected manufacturing data and a spike in existing home sales.

IHS Markit’s August report on U.S. manufacturing – released today – revealed that manufacturing activity hit its highest level in 19 months while manufacturing services reached a 17-month high, too.

“Client demand picked up among both manufacturers and service providers,” said IHS Markit economist Sian Jones.

It’s a bullish sign to be sure, but it won’t be enough to push the market higher all on its own. Even in addition to a surprise 24.7% month-over-month jump in existing home sales for July.

Concerns over the coronavirus relief bill still linger, casting doubts over an extension of the current rally.

More than 100 House Democrats urged party leadership this week to alter their version of the bill, reducing the proposed unemployment benefit to $600 per week. House Speaker Nancy Pelosi was having none of it.

“I don’t think strategically it’s where we should go right now because the Republicans would like to pass something like that and say forget about [other priorities],” Pelosi said in an interview on PBS’s “NewsHour.”

“I don’t think the timing is for us to do it right now.”

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And so, the standoff continues. The Senate isn’t expected to vote again until after Labor Day, meaning that the market’s troubles could persist for at least a few more weeks.

To Apple (NASDAQ: AAPL) and the rest of Big Tech, however, a delay in negotiations might not make a difference.

Bulls are once again sending AAPL shares soaring today in anticipation of a split on Monday. The stock gained almost 4% as of noon, representing an increase of roughly $85 billion in market cap in a single trading session.

Automakers General Motors (NYSE: GM) and Ford (NYSE: F) are worth only $69.1 billion in combined market cap by comparison.

Apple’s parabolic move, while impressive, has analysts questioning whether or not the stock is truly worthy of its sky-high valuation.

“These are great companies and they are likely to continue to deliver solid earnings growth, but one has to wonder if there isn’t too much enthusiasm baked into their current stock prices,” Brian Price, head of investment management at Commonwealth Financial Network, said.

“It would be constructive for the overall health of the stock market if we started to see wider breadth and other sectors showing relative strength.  We’ve had a few minor rallies in cyclical value-oriented sectors off the March lows but none that have been sustainable.”

In other words, non-tech sectors need to catch up with tech’s “top dogs” if the market’s going to stay afloat.

Banks, for example, have been “idling” above their Covid-19 crash lows for months now. A rotation out of tech and into the less popular sectors started to take place last week.

As of today, though, that rotation is officially off. That’s not to say a rebalancing won’t happen in the coming weeks; it certainly could.

But so long as the AAPL buying frenzy continues and a coronavirus relief bill remains un-passed, the trend won’t change.

At least, not any time soon.

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