Dow Cools Off as Apple Paces for Another Steep September Loss

North Korea's Kim Jong Un called President Trump a 'dotard,' and threatened fire

Sep 22, 2017 at 2:48 PM
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The week started off strong for the major stock indexes, with the Dow Jones Industrial Average (DJIA) and S&P 500 Index (SPX) climbing to record highs leading up to and just after the Fed's highly anticipated September meeting. However, the Dow's win streak was snapped at nine sessions, and its string of record closes ended at seven, as expectations for a December rate hike grew. In addition, an ugly week for Apple -- despite the iPhone 8 release -- and escalating tensions with North Korea also weighed on stocks toward the end of the week.

All Eyes on Yellen

Janet Yellen & Co took center stage this week, as the Federal Open Market Committee (FOMC) hosted its two-day policy meeting. The central bankers emerged on Wednesday with a plan to begin unwinding the Fed's massive balance sheet in October, and the generally hawkish tone lifted expectations for another rate hike by the end of the year. The announcement helped to lift bank stocks, too, with the SPDR S&P Bank ETF (KBE) currently attempting to extend its Fed Week win streak. However, gold suffered its worst day in months after Yellen took the podium, bucking the trend of a Fed Week boost for gold exchange-traded funds (ETFs).

Apple Stock Set for Horrible Week, Worse-Than-Usual September

As of this writing, Apple stock is pacing for its worst week since April 2016. The equity -- not to mention several Apple suppliers -- was slammed on Wednesday, amid negative reviews for the Apple Watch Series 3. Specifically, people complained of connectivity and battery limitations. In addition, many analysts opined that iPhone 8 pre-orders looked weak, and the new phone seemed to debut to lackluster fanfare on Friday -- possibly as fanboys await the $999 iPhone X, which won't be out until November. 

However, Apple has historically been one of the worst stocks to own in September, and this year appears to be no different. While the stock has averaged a monthly loss of 4.2% over the past 36 Septembers, according to data from Schaeffer's Quantitative Analyst Chris Prybal, it is currently down 8% month-to-date. Amid the noise, traders could soon focus on Apple Watch rival Fitbit, or Google's smartphone event in a couple weeks, with the Alphabet unit just announcing a $1.1 billion acquisition in the mobile market.

North Korea, U.S. Exchange Threats

North Korea was back in the collective crosshairs again this week. On Tuesday, President Trump spoke to the United Nations (U.N.) General Assembly, vowing to "totally destroy" the rogue nation if the U.S. has to defend itself or its allies. In response, North Korean leader Kim Jong Un warned of the "highest level of hard-line countermeasure in history," and threatened to "tame the mentally deranged U.S. dotard with fire." The isolated country's next nuclear test could include a hydrogen bomb into the Pacific Ocean, according to North Korea's foreign minister. 

As a result, several defense stocks moved higher on Friday, including Boeing, which hit another record high with help from a pair of price-target hikes. The Dow stock could be even higher next week, too, as fund managers do some end-of-quarter window dressing. Also in the spotlight, the iShares MSCI South Korea Capped ETF (EWY). The South Korea ETF has historically performed well during the fourth quarter, averaging gains of 1%, 1.6%, and 2.1% for October, November, and December, respectively. 

Earnings Continue to Trickle In

A handful of earnings reports trickled in this week. Bed Bath & Beyond stock got demolished after lowering its full-year guidance, and analysts remained devoted to FedEx and Adobe even after an unimpressive earnings showing. General Mills also stepped into the earnings booth, with GIS stock subsequently sinking to two-year lows. Meanwhile, Finish Line and CarMax both reported earnings on Friday, with shares of the latter touching new highs.

T-Mobile, Tesla, Toy Stocks, and Tobacco

Speculation about a Sprint/T-Mobile merger started to swirl again, sending both stocks higher -- and translating into big gains for one TMUS options trader. Meanwhile, semiconductor stock Advanced Micro Devices got a mid-week jolt on rumors of a Tesla partnership, though the chatter was ultimately denied. Elsewhere, toy stocks were in the hot seat, with Hasbro, Mattel, and JAKKS Pacific stocks moving on reports of a Toys 'R' Us bankruptcy. Tobacco stocks were also making headlines, after the Food and Drug Administration (FDA) issued revised guidelines for tobacco manufacturers.

Fed Speeches, Healthcare Vote on Tap

The Fed will remain in the spotlight next week, with Fed Chair Janet Yellen highlighting a week full of central bank speeches. In the earnings confessional will be blue-chip athleisure issue Nike, as well as chipmaker Micron Technology. Insurers and healthcare stocks could also be in the spotlight, with the U.S. Senate expected to vote on the latest Republican healthcare plan. And, of course, we'll say goodbye to the third quarter -- which could translate into big gains and losses for these 40 stocks.

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