How Apple shares could save the S&P 500 from the bear market

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The

S&P 500
it looks like it could fall into bear market territory. Still, there’s a good chance it won’t happen, thanks

Apple
.

There is no shortage of fear factors that could put the index in such intimidating territory. It starts with the Federal Reserve, which is trying to rule high inflation by raising short-term interest rates and cutting its bonds, moves that are likely to slow economic growth and revenue growth. In addition, there are blockades in China. Limited inventories from the region result in higher costs for companies, which is another earnings-related concern.

For the S&P 500 to enter the bear market, the index would have to fall 20% or more from the highest value of 4796, reached on January 3rd. The index, at just under 4,000 by Monday’s close, would have to fall about 4% to 3,836 to reach that point. Moreover, the recent trend of index prices makes this further decline within possibilities.

Its fall on March 29 leads to a fall below that level of 3,836, wrote Frank Cappelleri, chief market technician at Instinet. This is especially possible because the index has fallen below the level at which it has recently enjoyed support – or customers. The index has not been this low since early April 2021.

But such a decline could be avoided if Apple shares (ticker: AAPL) continue to do what they did recently: hold up better than the wider market. Apple surpassed the S&P 500 throughout the year. With just over $ 152 per share, Apple shares are still trading just above the $ 150 area where buyers have consistently entered stock increases several times over the past year plus.

If Apple shares really stop falling, that would set a noticeable limit to the potential fall of the S&P 500.

Here’s how everything goes wrong. Apple ‘s market capitalization is just over 7% of the S & P 500’ s total market capitalization – and the index level is market capitalized. Thus, stocks with higher market values ​​have a huge impact on the movement of the index.

This means that if Apple shares stand above $ 150, the S&P 500 has a chance to stay above the bear market, as the remaining 93% of the index’s market value would have to fall by more than 5% to bring the entire index down to 3,836. “If the AAPL eventually gets caught up in the big U.S. / global capital cuts, it will be one of the signs that we are at really low levels that can be invested,” wrote Nicholas Colas, co-founder of DataTrek.

That drop doesn’t seem like a safe bet right now. Apple has yet to fall below the key $ 150 level – and for good reason. The shares are considered one of the highest quality names on the market. Its steady earnings growth and war suitcase keep investors in stocks. “I wouldn’t cut Apple,” said Matthew Tuttle, chief investment officer of Tuttle Capital Management. And right now, “in the $ 150 area, there aren’t a lot of downsides and that would end up being pretty significant support,” Tuttle said.

If $ 150 doesn’t last, take a look below. At that point, anyone can guess how much the stock could fall. Just imagine the damage to the S&P 500 if Apple enters free fall mode.

Write to Jacob Sonenshine at [email protected]