S&P 500, Nasdaq Celebrate a Record-Breaking Quarter, but It’s All About Apple

by Brad Moon | April 3, 2012 8:58 am

The performance of key benchmarks has been hard to believe during the first quarter of 2012: the Nasdaq is up 18.7% (with the NASDAQ-100 up 18%) and the S&P 500 is up 12%. It doesn’t just look good, especially after a relatively flat 2011. Records are being set.

The S&P 500’s gain since Jan. 1 represents the best first-quarter gain in its 55-year history, while the Nasdaq is having its best start to a year since 1991. Tech stocks can take a large part of the credit in this market resurgence, but Apple (NASDAQ:AAPL[1]) is front and center. Information technology companies make up a large chunk of the S&P 500 gains (the sector is up 21.4% on that index) and, as Barrons points out, that Apple alone is responsible for one quarter of that growth. Reuters pins the Nasdaq performance on five tech companies and, not surprisingly, Apple is again singled out as being key to this tech resurgence.

Apple’s stock started out in the new year at $405 and has climbed relentlessly to today’s high of nearly $619, a 48% rise in value for the year, while setting new record highs so frequently it has begun to seem routine.

The company is so large, with a market cap of over $575 billion, that when its stock price moves significantly, as it has in the first quarter, it can bring the entire market along with it. Apple alone is credited with accounting for  34% of the NASDAQ-100‘s gains. Add a handful of other large tech companies that have performed well too and you have the makings for a big quarter.

The other sector leaders

Outside of Apple, four other big tech companies have been on fire in 2012.

• Microsoft (NASDAQ:MSFT[2]) has been frequently left by the sidelines as analysts and the media focused on Apple, Samsung (PINK:SSNLF[3]), and Google (NASDAQ:GOOG[4]) and the race to dominate the mobile computing world. The Redmond company’s stock has done little in recent years, but in 2012, it’s up by 30% and counting. Revenue for the quarter ending Dec. 31, 2011, was $20.89 billion (up 5%). That may not be the end of Microsoft’s run, either. The next release of its Windows operating system — Windows 8, featuring an all new “Metro” interface — has been generating buzz and is due for release in 2012, as is Office 15, the latest version of the company’s flagship office productivity suite. As Android smartphones continue to sell, Microsoft also collects a tidy royalty fee on each unit.

• Oracle (NASDAQ:ORCL[5]) reported revenues for the quarter ending Feb. 29, 2012, of $9.04 billion, with net income for the quarter at $2.5 billion (up 28%). In a letter to investors, Safra Catz, the company’s president and CFO said: “Oracle is on track to deliver the highest operating margins in our history this year.” Oracle’s stock was trading at $25.53 at the end of 2011, but has been in the $29-$30 range for most of 2012.

• In its most recent earnings report, released on Jan. 19, 2012, Intel (NASDAQ:INTC[6]) reported full-year revenue in 2011 of $54 billion (up 24%). With its Medfield system-on-chip processor, Intel is hoping to overcome a slow start and become a major supplier of processors for Google smartphones and tablets. The push has already begun, with the announcement of several strategic partnerships and France Telecom‘s (NYSE:FTE[7]) announcement of Intel-powered Orange phones arriving in Europe this summer. Intel stock was as low as $19.19 in 2011, but has climbed steadily to top $28.

• In January, Google reported revenue of $10.58 billion for the quarter ending Dec. 31, 2011, an increase of 25% over the previous year. It transitioned to a new CEO in 2011 and its $12.5 billion purchase of Motorola Mobility (NYSE:MMI[8]) received regulatory approval this year. The company’s stock has rallied from a low of $474 in June of 2011 to $641 — off from it’s high of nearly $715 in 2007, but a significant gain for the first quarter of 2012.

Apple makes up 17.2% of the NASDAQ-100 weighting, while Microsoft, Oracle, Google, and Intel collectively account for another 25%. That’s 42% among those five companies — not quite enough to trigger an adjustment (such as happened in 2011 when Apple had its weighting dropped from 20.5% to 13.2%), but it’s getting close.

On the plus side for other tech companies, many are trading at higher prices simply because of the confidence in tech stocks introduced by the Apple effect. However, if Apple should stumble, other tech companies could be unfairly punished because Apple is so big. A drop in its stock brings the whole Nasdaq down, and that could spook investors.

But with the new iPad selling like hotcakes, a new iPhone due, and the possibility of an Apple television set on the horizon for 2012, there should be no worries about Apple stock taking a hit this year.

As of this writing, Brad Moon did not own a position in any of the stocks named here.

Source URL: https://investorplace.com/2012/04/sp-500-nasdaq-celebrate-record-breaking-quarters-but-its-all-about-apple-aapl-msft-intc-orcl-goog/

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