Today: Apple's (AAPL) stock turns around as the company sells 2 million iPhones in China launch, but doubts persist. Also: Wall Street heads higher on "fiscal cliff" hopes, Facebook and Instagram news.
Apple finds a rebound as iPhones sell well in China, but analysts still have doubts
Apple's dreary end of 2012 seemed to turn around Monday, with the company's stock bouncing 1.8 percent higher after its iPhone launch in China performed better than initial reports of small lines seemed to suggest, but analysts are still growing warier of the Cupertino tech giant.
Apple shares dropped 4.4 percent last week and 8.9 percent the week before, part of a downward trend that has seen the Cupertino tech giant decline to "bear market" territory since hitting an all-time high of $705.07 on Sept. 21, the day the iPhone 5 launched in the United States and several other countries. Since that launch date, Apple has dealt with questions about its ability to produce enough iPhones to meet demand; analysts' and consumers' initial unhappiness with the iPad refresh, in addition to a decline in tablet market share; and a fiasco resulting from the company's release of a new mapping application that angered users and led to an apology from CEO Tim Cook and a major executive shake-up.
The company's continued weakness has led to a lot of theories, and those theories have led to analysts cutting their forecasts for the company's financial and stock performance, which continued Monday despite iPhone sales hitting 2 million in China in just three days. Citigroup downgraded the stock from "Buy" to "Neutral," still a rarity among analysts, despite recent price target cuts. The company cited reports that Apple has cut orders for components from Asian suppliers, signaling it expects purchases to decrease in the beginning of 2013.
"Near-term supply chain order cuts, while inconclusive in nature, bring into question the strength of iPhone 5 and refocus investors onto risks in the Apple story," Citi analyst Glen Yeung wrote.
In yet another mixed message from analysts, however, Morgan Stanley issued a note Monday morning suggesting that Apple still has plenty of growing room in the mobile-device market.
The Citigroup cut pulled Apple below $500 for the first time since February in premarket trading, but the price rebounded before the market actually opened, and never dipped that low in regular trading as it began to rebound. Still, analysts are beginning to split on Apple, with some expecting the volatile stock to rebound to higher than $1,000 a share in 2013 while at least one analyst says the stock will fall nearly another 50 percent.
Los Angeles Times reporter Chris O'Brien pointed out that there are measures Apple could take to cut down on the extreme volatility of its stock price, which has been so extreme that Howard Silverblatt, senior index analyst for S&P Dow Jones Indices, told O'Brien that "We've not seen anything like this in the modern trading era. Ever." However, it is unlikely that Apple would bother, analysts said.
"It's not Apple-like," Topeka Capital Markets analyst Brian White told O'Brien. "They don't try to react to the stock price. They don't try to game the financial market."
With no moves from Apple, the volatility is likely to continue through the end of 2012 and likely until the first earnings report of 2013, when huge holiday shopping revenues could change the conversation on Apple. The company ended Monday's trading session at $518.83, which kept it below a $500 billion market cap at $488.1 billion.
Both sides seem to give a bit in 'fiscal cliff' talks, investors send stocks up
The overall market also continues to be volatile, and not just because Apple weighs so heavily on two of the three major U.S. indexes: Daily movement on the "fiscal cliff" debates on Capitol Hill also can cause big swings in stocks, as investors hope for a resolution to the debate before the end of the year.
In talks on Monday, Republican John Boehner, the leader of the House of Representatives, made a large concession, agreeing to include some tax hikes on the wealthiest Americans. President Barack Obama had been demanding increases on top earners as part of the package, and agreed to also give in on some of his other demands, signaling that an agreement on a new plan to replace the tax hikes and spending cuts scheduled to take place at the beginning of 2013.
Upon hearing that negotiations had finally led to some fruit, investors sent stocks soaring, with the Standard & Poor's 500 index experiencing its largest one-day gain in a month. All three main U.S. stock indexes increased healthily, with financial stocks such as Citigroup and Bank of America leading the way.
"Trumping everything right now are the fiscal cliff talks. It seems like progress is being made. I think it's getting to the nitty-gritty," Alan Lancz, president of Alan B. Lancz & Associates, told Reuters. "The bet right now is that something will come by the end of this week."
Google and Cisco gain, Facebook and HP decline in good day for tech stocks
Technology stocks were some of the most productive gainers on Monday, with the tech-heavy Nasdaq leading the three major U.S. stock indexes with a 1.3 percent gain and the SV150 index of Silicon Valley's largest tech companies increasing 1.4 percent.
Google (GOOG) stock rose 2.7 percent after Bloomberg News reported that the Mountain View search company was nearing a deal to end the Federal Trade Commission's antitrust investigation, which has stretched out to almost two years. Cisco (CSCO) gained 1.3 percent after a report that it was looking to sell its router business, Linksys, for less than it purchased it in 2003 was followed by a report that Belkin was interested. SolarCity, the San Mateo solar installer that debuted with a big post-IPO pop last week, gained 5.2 percent Monday.
In a newsy day, Facebook was one of few big-name Silicon Valley stocks to drop, though it only lost 0.2 percent on the day. The company announced that it was launching a new feature that allows mobile users to find businesses near them, similar to popular features in Google Maps and Yelp; Yelp suffered, dropping 2.7 percent. The company was also reportedly looking into mimicking the success of startup Snapchat by introducing a similar service, as its big-money acquisition, Instagram, announced new privacy controls that would allow the app to use consumers' pictures in advertising. Morgan Stanley agreed to a $5 million fine from the state of Massachusetts to settle issues related to Facebook's IPO, as well.
One other noteworthy drop Monday was from Hewlett-Packard (HPQ), which had been rebounding thanks to rumors that activist investor Carl Icahn was snatching up shares of the struggling Palo Alto tech giant. Deutsche Bank analyst Chris Whitmore wrote Monday that even if Icahn were to buy in to the company and push for it to break apart, it would not be good for the company; the stock declined 3.7 percent on the day.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 39.27, or 1.32 percent, to 3,010.6
The blue chip Dow Jones industrial average: Up 100.38, or 0.76 percent, to 13,235.39
And the widely watched Standard & Poor's 500 index: Up 16.78, or 1.19 percent, to 1,430.36
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.