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Yesterday's sharp reversal in shares of Apple (AAPL) and the subsequent decline in the overall market led many to argue that without shares of AAPL continuing to levitate, the rally in the overall market was in jeopardy. Granted, AAPL does have the largest weight in the S&P 500 and the Nasdaq 100, but even at these weighting, it still is not necessarily the tail that wags the market.
Just look at the performance of the major averages in 2011. While shares of AAPL rose by more than 25% in 2011, the Nasdaq 100 only rose by 2.7%, and the S&P 500 was unchanged. If Apple surged in an environment where the market was flat, what makes people think that a decline in AAPL automatically means the market will decline?
A shorter term look shows a similar picture. The chart below shows the intraday performance of the Nasdaq 100, S&P 500, and AAPL so far today (2/16). As of around 3:00 PM ET, shares of AAPL were up about the same as the S&P 500 and a bit less than the Nasdaq 100. More importantly, however, is how the two indices and AAPL got there. Both indices opened near unchanged levels this morning and then traded sideways for the next hour and a half. Then at around 11 AM, both indices started to rally.
AAPL, on the other hand, opened down more than 1%, and then like the market, traded pretty much sideways. In the case of AAPL, though, the rally in its shares did not begin until around noon when the rally in the rest of the market was well underway. Today at least, rather than AAPL wagging the market, the market has been wagging AAPL.
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