The early success of the Apple Inc. (AAPL) iPhone 7, Samsung’s troubles and the chance of an interest rate increase hang over Wall Street this week. But all have the potential to be overshadowed by the threat of terrorism after a series of explosions shook New York and New Jersey this weekend.
Wall Street has proven to be resilient — its bull run has lasted seven years, after all, despite uncertainty from Brexit, the rise of the Islamic State and domestic terror in Florida, California and elsewhere.
But short-term dips in the stock market are likely when uncertainty rears its head, and the U.S. financial market will likely be affected should more explosives be found similar to those in New York’s Chelsea neighborhood on Saturday, and those found late Sunday in Elizabeth, New Jersey — and particularly should any incidents occur in New York’s financial district itself.
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The COBE Volatility Index, known as the fear index, is a good indicator of Wall Street’s jitters — the higher the index, the more volatile the markets. Interestingly, the iPath S&P 500 FIX Short Term Futures ETN (ticker: VXX), which tracks the VIX, was down 4 percent in premarket trading Monday, indicating some short-term confidence in the market.
That confidence likely comes from expectations that the Federal Reserve will again delay plans for a modest interest rate hike.
FOMC: Will it or won’t it? While everyone should have an eye on this week’s Federal Open Market Committee meeting just in case … well, the market doesn’t expect much out of this one.
The CME FedWatch Tool — a great tool that leverages Fed Fund futures prices to determine the market’s expectations of a rate change — is showing an 88 percent chance that the Fed will keep the rate pat at 0.5 percent when the meeting adjourns on Wednesday.
Why the pessimism?
Some market participants expected a rate hike at the September meeting if U.S. economic data provided a perfect storm of sorts. However, a few releases such as weak August payrolls, as well as a hesitancy to move interest rates ahead of the November presidential election, have many convinced that a hike won’t come until at least December, if not 2017.
But a few arguments are there. Job growth in June and July was healthy, and inflation picked up significantly in August — signs the Fed supposedly is watching before raising rates.
It’s certainly enough reason to pay attention to any post-FOMC remarks.
iPhone Sales. One of the biggest stories this week will be the figurative clutching of straws in Wall Street’s quest to determine what Apple’s iPhone 7 sales look like.
Because Apple isn’t saying anything.
Earlier this month, the company announced that for the first time in the iPhone era, it would not release first-week sales of its spanking-new iPhone. This move was met by wide, healthy skepticism — after all, Apple is coming off two consecutive quarters of declining iPhone sales after reporting year-over-year improvements in every prior quarter.
But Apple has at least controlled the narrative, providing a different reason: Namely, that early iPhone sales will be determined not by demand, but by supply.
“As we have expanded our distribution through carriers and resellers to hundreds of thousands of locations around the world, we are now at a point where we know before taking the first customer pre-order that we will sell out of iPhone 7,” Apple spokeswoman Kristin Huguet told Reuters.
It’s an easy argument to buy if you consider that iPhone 7’s Friday launch included 28 countries, which dwarfs last year’s first-day count of 12.
But Cowen and Co.’s Timothy Arcuri also believes Apple is managing its supply chain more tightly to avoid what happened in 2015. “Overall, the data validates Apple’s desire to maintain some supply constraints until demand becomes a little more certain, in an effort to avoid the supply glut and associated cuts in the supply chain for iPhone 6S starting last November,” he says in a research note.
So where will this hotly desired information come from?
“Since Apple has already indicated it won’t release launch weekend numbers, we won’t know official iPhone 7 sales until the company’s October earnings report,” says InvestorPlace technology specialist Brad Moon. “However, stats released by carriers and analysts tracking online retail sales are pointing to an iPhone 7 launch weekend that should handily beat expectations and could well set a new record.”
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T-Mobile US (TMUS) and Sprint Corp. (S) gave Apple shares a jolt when they announced data showing iPhone 7 and 7 Plus pre-orders were roughly four times those of both the iPhone 6 and 6s. AT&T (T) and Verizon Communications (VZ) also weighed in, with AT&T saying sales were up, though Verizon’s Marni Walden, executive vice president and president of product innovation and new business, called their early results “business as usual.”
Apple doesn’t release earnings until late October. Until then, Wall Street might have to make do with a smattering of telco and analyst chirping.
Galaxy Note 7 fallout: While Apple is drawing onlookers with iPhone honey, Samsung is doling out straight vinegar.
Samsung has made all the wrong headlines amid reports that a handful of its Galaxy Note 7 smartphones have been catching fire and even exploded. The company first issued a voluntary recall of 2.5 million handsets on Sept. 2. Then last Thursday, the U.S. Consumer Safety Agency announced its own formal recall.
Samsung says “Note7 replacement devices will be available in the United States at most retail locations no later than Sept. 21, 2016.” But this situation will be far from fixed come Wednesday.
The electronics giant’s shares have lost about 4 percent of their value since the recall, though it could get worse when the final damage is tallied. Already, Samsung is selling shares in several companies, including its entire stake in Seagate Technology (STX), to raise cash to pay for the recall’s costs.
Wells Fargo is under the microscope. Lastly, Wells Fargo & Co. (WFC) CEO John Stumpf is expected to testify in front of Congress sometime this week amid allegations of widespread fraud, and he could be the next casualty in the continued fallout.
Specifically, California and federal regulators say Wells Fargo opened some 2 million unauthorized customer accounts, such as credit cards and checking accounts, and some 5,300 were fired over the practice in the past five years. WFC was fined $185 million, and the company lost more than $15 billion in market capitalization as shares slumped more than 6 percent since the ruling came down. Plus, Wells Fargo took a shot to its relatively squeaky-clean image.
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Stumpf — who aptly navigated Wells Fargo through the financial crisis and whose bank boasts the best return among the Big Four since his hiring in June 2007 — is expected to face the Senate Banking Committee this week.
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Terrorism Fears, FOMC and Apple, Inc. (AAPL) to Have Wall Street’s Attention This Week originally appeared on usnews.com
