foxex: Apple's New Act

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Monday's Headlines

Apple's Content Play

Markets Close

Dow
25,516.83 +0.06%

S&P
2,798.36 -0.08%

Nasdaq
7,637.54 -0.07%

VIX
16.61 +0.79%

INV Anxiety Index
101.61 Neutral

US 10-Yr Yield
2.42 -1.43%

Stocks flat as Apple takes the Stage

U.S. markets waded around in negative territory all day, and closed relatively flat except for the DJIA, which managed a slight gain. The DJIA did cross through a significant technical indicator today, which James will explain below.

It's a heavy week for economic data in the U.S. and Europe, as we will get several reports on consumer confidence and sentiment, the housing market and Eurozone business activity. Typically, these weekly and monthly reports don't move markets unless they contain surprises, but it's a delicate moment for both the U.S. and European economies, so sensitivities are heightened. Regardless, today was Apple's day to shine.

Apple's Big Bite into Content

While the media industry has appeared to be in a period of consolidation, big brand partnerships and convergence, Apple has been working quietly on their own media strategy. The tech company unveiled those plans today in a media event at its Cupertino, CA headquarters.

Here's our full write-up of the rollout: Four Takeaways From Today's Apple Event

Here are the highlights if you are on the go

Apple Card: a new credit card in partnership with Goldman Sachs. It's an extension of Apple Pay, and offers 2% cash back on purchases. Apple says it uses machine-learning on Apple's devices to create reports on your spending and purchasing habits.

Arcade: A new video game service with over 100 new games available through the App store. Pricing to be announced.

Apple News +: This is a premium version of Apple News priced at $9.99 month with content from 300 publishers including Vogue, GQ, Sports Illustrated, the WSJ and more.

Apple TV +: Apple's big foray into video content. It announced new programming partnerships with legendary filmmakers and producers like Steven Spielberg, Sofia Coppola, Oprah Winfrey and Ron Howard, as well as licensing agreements with HBO, Showtime, Starz Network and more. This will be priced at $9.99 month.

Why it Matters

Finding the holy grail of great content with mass distribution is the eternal quest for media and distribution companies. AT&T, which has the distribution, now has the content via Time Warner. Verizon bought Yahoo and AOL. Comcast bought NBCUniversal. Disney, as we wrote last week, chose to go it alone and is launching its own streaming service. Amazon has Amazon Prime and hundreds of millions of customers around the world.

Apple, as Oprah Winfrey said today, is in 'one billion pockets'. That is a formidable installed base of users who check their phone hundreds of times per day. The problem is, iPhone sales are slowing and existing users are slow to upgrade to newer versions given how expensive they are. The answer for Apple has to be getting more money from its installed user base. To that end, Apple has been pushing the 'Services' part of its business, which includes iTunes, Apple TV, Apple Pay and the App Store. Today's announcement was all about growing this business, which has high margins and is very 'sticky' with consumers. It was only an $11 billion business for Apple last quarter, but expect Services to be a growth engine for the Mac maker in future quarters. Apple plays to win and has $245 billion cash on hand to spend on this. (Chart courtesy of Alphastreet.com)

Brexit Latest

British P.M. Theresa May again finds herself in the unenviable position of trying to get the divided U.K. Parliament to approve a Brexit plan that the EU will also support. Parliament is scheduled to vote on a plan this week that May has to take back to Brussels for support. She's tried twice and come up empty.

Here are they key dates to keep in mind:

March 29th 11:59 PM: That was the date and time the U.K. was to officially leave the EU by exercising Article 50 of the Lisbon Treaty. That's not happening anymore.

April 12th: If May can't get a new deal approved by Parliament, or if the EU rejects their new proposal, the U.K. will fall out of the bloc in what is known as a 'Hard Brexit.'

May 22nd: If May can get Parliament to agree on a new plan that the EU will also accept, May 22nd is the new Brexit day.

German Bonds go Negative

We've been paying a lot of attention to the U.K. and China lately for obvious reasons. But one country that we haven't focused on enough is Germany, the largest economy in the EuroZone. It accounts for 20 percent of the GDP for all of Europe, but its economy has been slowing and is at risk of falling into a recession. It almost did that last year, but has proven resilient.

That said, though, the economic slowdown is taking its toll on Germany. German manufacturing is at a 7 year low, as its biggest customers - the U.S. and China - are both facing economic slowdowns.

The latest development that got investors' attention was the that the yield on the 10-year German bond, which is considered the benchmark treasury for the country, fell into negative territory on Friday. In other words, it actually cost investors money to lend money to the country - which is among the strongest economies in Europe. Here's a chart from Bloomberg which shows the cascade in yield over the past year.

Why it Matters

Brexit, however it happens, will undoubtedly bring forms of chaos to the European and global economy. Most experts think the pain will be localized to the U.K., however, and worst-case scenarios may already be priced into the market.

A German recession is a whole different problem. Germany has one of the most advanced manufacturing industries in the world and is the third largest importer and exporter on the planet. While it has managed to stave off a recession, the fact that its 10- year Treasury note has a negative yield is an ominous sign in a very dicey time for the global economy.

We'll keep a close eye on this one.

More News:

10 Big Bets Behind a No. 1 Fund's 27% Return

The Biggest Threats Facing Tech Stocks Now

10 Major Companies Tied to the Apple Supply Chain (AAPL)

Chart of the Day: Dow Forms Bullish Golden Cross Pattern

Though markets were still very shaky on Monday after Friday's rout, the Dow Jones Industrial Average - the most widely-watched market index by investors and the media alike - has formed a bullish 'golden cross' technical pattern. The actual cross occurred last week, but it's been tentatively confirmed since then. A golden cross is generally defined by technical analysts as the point at which a shorter-term moving average crosses above a longer-term moving average. The most common combination of averages are the 50-day and 200-day. Therefore, a golden cross occurs when the 50-day moving average crosses above the 200-day moving average.

This pattern is among those considered most bullish (or positive) by many traders, investors, and analysts. Like its evil cousin, the "death cross', the golden cross doesn't happen too often, especially on major indexes like the Dow. So when it does happen, it's a rather noticeable event. The last time it happened for the Dow was in April 2016, after which the market embarked on a long bullish trend.

Of course, there is no assurance whatsoever that a market will continue to rise after a golden cross forms. Sometimes, failure to follow through to the upside results in what's called a false signal, or a failed pattern. In fact, the risk of that happening this time is rather high, as real worries about slowing economic growth and a potential recession on the horizon are placing some heavy pressure on the Dow and other key indexes.

As for those other indexes, the S&P 500, Nasdaq Composite, and even the small-cap Russell 2000, have all yet to form golden crosses. So, either the Dow may be leading the pack technically to a further market recovery, or it's just the first (and maybe, only) major index to form a false bullish signal before falling into another market pullback or correction.