Apple has lost over $105 billion in market cap (market capitalization or market cap is the total money market value of the shares outstanding of a publicly traded company; it is equal to the share price times the number of shares outstanding) over the last two weeks. The lost value in market cap would place Apple greater than the #62 economy in the world GDP list, just behind the country of Morocco. This is why it makes news when Apple’s stock goes up or down. With a market cap of almost ¾ of a trillion dollars, Apple’s market cap is about the size of the Switzerland’s GDP, making it #20 on the world list. In terms of wealth, if Apple were a country, it would be the 55th richest country in the world.
Like it or not, Apple matters, and the outlook of the largest company in the world matters to the economic health and commodity demand outlook of the world. However, this week we have not been waiting on Steve Jobs to come back to life and turn around Apple—what we were waiting for was the release of the jobs data from the US Labor Department.
American companies added 215,000 jobs in the month of July, while the unemployment rate remained at 5.3%. The labor force participation rate also remained flat at 62.6%, its lowest level since 1977.
Economists polled by Reuters expected nonfarm payroll gains of 223,000 in July, with the unemployment rate at 5.3%. The news was not good, but it was not bad. However what the market needed was either a big gain or a big miss, as at least that would have given us some certainty around the Fed’s next move.
On Tuesday, Dennis Lockhart, the president of the Atlanta Fed, said that he supports a rate hike at the U.S. central bank’s next policy meeting in September. In an interview with the Wall Street Journal, Lockhart said it would take major weakness in the data to convince him not to move. “I think there is a high bar right now to not acting, speaking for myself,” Lockhart said.
The positive is that jobs are growing and unemployment is stable and actually about where it should be, but the large concern is that the labor participation rate is only 62.6, which if you remember back to ECON 101 means that the actual unemployment rate is much higher than the 5.3% reported as many people have just simply given up hope of finding work and are not even counted in the jobs data.
As we talked about last week, the Fed is tight lipped, leaving the markets in limbo on exactly when the first rate hike in over nine years is coming. If there is one thing the market hates, it is uncertainty. Because the jobs number did not provide any real clarity, it was a huge disappointment as we still do not have any clear picture of how the Fed will digest the data and what and when will be their move.
Though the market hates uncertainty, traders can use this uncertainty to their advantage. Volatility creates opportunity, and as EQS teaches our readers, with trading discipline we can make money no matter what direction the market and the economy moves. It is clear that the market has finally been waking up to what we have been pointing out for weeks: the world economy is approaching the end of a business cycle. The US dollar continues to have global strength, commodities are still on a back slide, and now Wall Street approaches something that has not happened in over four years: seven straight down days on the Dow Jones Industrial average.
It is really all about the jobs. The jobs data was really a no-win situation for the market. A big gain and the Fed was more likely to raise rates, a big miss and the business cycle has begun to end and we will face recession. The data that was released was neither positive nor negative, and this could be an even bigger blow to the markets as it now throws further uncertainty into an already fragile world economy.