Jim Cramer argues that the market’s lack of conviction is perfectly captured by the movements in shares of Apple.<\/b>
\nAs investors try to square conflicting reports on the state of the U. S. economy and U. S.-China trade relations, the action in shares of Apple has become a microcosm of the broader stock market, CNBC’s Jim Cramer said Monday.
\u00ab\u00a0In a way, Apple’s the perfect metaphor for this moment,\u00a0\u00bb Cramer said as stocks swung higher after a wild trading session. Shares of the iPhone maker traded lower intraday on worries that a legal move by Qualcomm would stymie Apple’s sales in China, but managed to launch a small rebound into the close.
Cramer, host of \u00ab\u00a0Mad Money,\u00a0\u00bb argued that Apple’s moves perfectly captured how flighty investors have become as they struggle to keep their conviction intact in this volatile market.
For example, Apple’s stock dropped from $168 to $164 a share on the Qualcomm news. Then, on CNBC’s \u00ab\u00a0Halftime Report,\u00a0\u00bb all four panelists, including Cramer, said that Apple’s shares had hit an interesting level to consider buying.
All of a sudden, \u00ab\u00a0the stock turned on a dime, rallying $4 bucks from its lows while the show was on. Now, I’ve scoured the wires \u2014 nothing else happened during that period,\u00a0\u00bb Cramer said. \u00ab\u00a0I think it’s a sign, a sign that jittery, insecure, underconfident traders will take their cue from anything.\u00a0\u00bb
\u00ab\u00a0Don’t get me wrong, everyone on that panel is worth listening to,\u00a0\u00bb he continued. \u00ab\u00a0But the action here is a sign that the market’s become way too mercurial for many people.\u00a0\u00bb
Speaking more broadly, Cramer pointed to some intriguing patterns in the stock. Apple’s shares peaked on Oct. 3 at $233, which amounted to a $1-trillion-plus market cap. On Monday, Apple’s market cap dipped below $800 billion.
Oct. 3 happened to be the same day that Federal Reserve Chair Jerome Powell said that interest rates were \u00ab\u00a0a long way\u00a0\u00bb from neutral, which told Cramer that Powell was considering essentially sacrificing economic success for the sake of curbing inflation with a series of rate hikes.
\u00ab\u00a0In retrospect, his statement was such a confidence buster that Oct. 3 may have marked the peak of the entire business cycle,\u00a0\u00bb Cramer said Monday.
The next day, Vice President Mike Pence gave a hardline speech on China at the Hudson Institute in which he cast the ongoing trade dispute as a way to curb China’s geopolitical ambitions, signaling a split in the White House between those who genuinely want a better trade deal and those who want to dismantle China’s position as a global superpower.
\u00ab\u00a0Between Powell’s comments and Pence’s speech, Apple’s stock got hit with a one-two punch that, frankly, until today, I [didn’t] think it was going to recover from,\u00a0\u00bb Cramer said. \u00ab\u00a0Even though the company reported a darned good quarter at the beginning of November, it hasn’t been able to get much traction.\u00a0\u00bb
Also weighing on Apple’s shares was the company’s choice to stop breaking down the quarterly sales results for its individual products, a move that many on Wall Street assumed was a sign that iPhone sales were slowing.
Add to that continuing analyst downgrades and reports of slowing demand for iPhones, and not only has Apple’s stock been struggling, but so have its investors, Cramer said.
\u00ab\u00a0It’s very hard to have conviction in Apple when there’s so much uncertainty and the only thing we know for sure is that the company’s not going to disclose the number of iPhones it sells. I’m even hearing people fret that Apple may pre-announce to the downside because the previous guidance was too bullish,\u00a0\u00bb he said.
And while Cramer stood by his longtime opinion that Apple creates \u00ab\u00a0the finest consumer products in history,\u00a0\u00bb even he admitted that he didn’t know what will happen with its stock, which is owned by his charitable trust.
\u00ab\u00a0Right now, Apple, the stock, sells at a dramatic discount to the [average stock in] the S&P 500,\u00a0\u00bb he said. \u00ab\u00a0Analyst after analyst has slashed their price targets.\u00a0\u00bb
That’s because, just like with the rest of the market, \u00ab\u00a0it’s hard for anyone to have conviction when there’s so much negativity,\u00a0\u00bb the \u00ab\u00a0Mad Money\u00a0\u00bb host concluded.
Shares of Apple ended the day up 0.66 percent at $169.60, rising slightly in after-hours trading.
Disclosure: Cramer’s charitable trust owns shares of Apple.<\/p>\n