Apple Drags Stocks Lower


For the second day in a row, shares of technology giant Apple are weighing heavily on the broader market as investors continue to fret about a potential decline in demand for its latest iPhone. At roughly halfway through the trading session, the Dow Jones Industrial Average is off by 24 points, or 0.22%.

As we've covered now extensively, rumors started swirling over the weekend that Apple had dramatically cut its orders for iPhone 5 component parts due to "weaker-than-expected demand." While the news sounded ominous, and has sent shares of the company falling, the news isn't new at all, as an analyst at Jefferies had forecast the cut a month ago. It's for this reason that my colleague Evan Niu wrote yesterday:

Some of the rampant fear today is misplaced, since the report is mostly recirculating what's already been noticed on the Street. It's quite possible that Apple is reducing orders, but the "weaker-than-expected demand" part is highly debatable. Competitive fears have been mounting lately, particularly from Samsung, which expects to post record operating profits in the fourth quarter. Want to know who else is expecting to post record sales in the fourth quarter?


Also impacting stocks today are fears of another round of political stalemate in Washington. In a speech yesterday, President Obama rejected any negotiations with Republicans over raising the debt limit. While the U.S. government formally reached the limit on Dec. 31, the Treasury Department has been using stopgap measures to continue funding the nation's operations.

Rating agency Fitch weighed in today by reminding lawmakers of the havoc caused by the last fight over the debt limit in the middle of 2011. According to the firm: "In Fitch's opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline."

On the heels of this news, shares of most technology companies on the Dow are trading lower, as many rely on funding from the government and an increasingly hesitant business sector for the lion's share of their revenue. After mounting a recent rally, Hewlett-Packard is the worst-performing Dow component today, down by nearly 3%, followed by International Business Machines, lower by roughly 1%.

Alternatively, the day's best-performing stock on the Dow is Bank of America . Analysts are watching the financial sector closely this week as many of the nation's largest banks report earnings for the fourth quarter of 2012. For its part, B of A had preannounced "modest" earnings due to two multibillion-dollar settlements that it had entered into at the end of the fourth quarter.

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John Maxfield owns shares of Bank of America and Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, Bank of America, and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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