Tradingview Weekly Market Wrap Friday 6 May 2022

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The vicious circle: Apple is once again under review. The European Commission suspects the company of abusing its position in the mobile wallet market. According to the regulator, Apple restricted access to NFC (Near-Field Communication) technology used in smartphones for contactless payments. Thus, the American company abused its dominant position in the market of mobile wallets available for iOS.

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The EC’s displeasure was caused by the fact that it is impossible to install other services for contactless payment on the iPhone, and all mobile devices have Apple Pay by default. It is noted that Apple has banned the developers of applications for mobile wallets to access the NFC technology on their devices. If the suspicions of the EC are confirmed, it will be a violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU), which prohibits the abuse of a dominant market position.

What are other problems the apple company faces?

Two words: the shortage of semiconductors. Persistent shortages of processors and other basic materials are forcing some of the world’s biggest tech and automotive companies to lower their targets this year. Last Thursday, Apple CEO Tim Cook warned that the company is “not immune” to supply chain problems, noting that there were “very serious supply issues” with components for the iPad in the last reported quarter.

What will happen to the company’s stock after the Fed rate hike?

Apple’s valuation of nearly $3 trillion has led management to start spending billions of dollars to buy back its stock, borrowing money at very low-interest rates. The problem is that the cost of borrowing looks set to skyrocket, so Apple may find it difficult to keep buying back shares.

By some estimates, about $83 billion of Apple’s debt must be repaid over the next five years, so management will have to decide whether to refinance the debt at higher rates or use cash to start paying it off. Reduced share repurchases could slow earnings-per-share growth, which could eventually put pressure on the value of the company’s securities.

Howbeit, the next few days will be crucial. Just for the indices, a breakdown of the 4100 level of the S&P 500 with the highest probability will lead to a further market decline of at least 7-10%. In the case of stocks, some could face a 20-30% correction on rather short time leverage.

 

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