Apple is among the largest companies in the world, with a broad portfolio of hardware and software products targeted at consumers and businesses. Apple’s iPhone makes up a majority of the firm sales, and Apple’s other products like Mac, iPad, and Watch are designed around the iPhone as the focal point of an expansive software ecosystem. Apple has progressively worked to add new applications, like streaming video, subscription bundles, and augmented reality. The firm designs its own software and semiconductors while working with subcontractors like Foxconn and TSMC to build its products and chips. Slightly less than half of Apple’s sales come directly through its flagship stores, with a majority of sales coming indirectly through partnerships and distribution.

The United States economy is full of innovation. It has to be. Manufacturing industries that dominated the economy decades ago - textiles, televisions, even automobiles to a large degree - have moved overseas, where labor and materials costs are lower. Yet the U.S. economy, even during the pandemic and the current period of high inflation, has expanded to record levels. If U.S. corporations weren't innovating, creating new products (such as vaccines and AI) and services (such as Zoom calls) and moving into new markets, the domestic economy would not be growing, and capital would not be flooding into the country. The current high level of the U.S. dollar relative to currencies around the world attests to the confidence that global investors have in the durable and innovative U.S. economy.

Since bottoming on September 16, the five- and 10-year Treasury yields have spiked higher. We have seen the same action from the two-year, which bottomed on September 24. Let's not forget, the FOMC cut the fed funds rate on September 18. We were looking for a jump in rates after the Fed cut, which was certainly a non-consensus call. The 10-year jumped to 4.12% on Thursday from an intraday low of 3.6% on September 17, or by 52 basis points (bps). The 10-year is closing in on some key levels including Fibonacci retracements at 4.14% and 4.17%. In addition, the 10-year is near a trendline off the peaks since late April that lies at 4.14% when looking out a week. Other key levels include 4.18% or the location of the 40-week exponential moving average (EMA); the next key retracement level is 4.3%. The five-year hit 3.97% yesterday, up from 3.39%, or by 58 bps. Immediate key overhead levels for the five-year run from 4% to 4.24% and include the 200-day simple moving average, the 50-week EMA, and some FIBO retracement levels. The two-year closed near 4% on Wednesday, up from an intraday low of 3.5% on September 25. Key levels above start at 4.1% and run up to 4.4%. On Wednesday, the iShares 20+ Year Treasury Bond (TLT) hit key chart, moving-average, and FIBO retracement support at 93.40 and bounced. The next key support level is 91.60. We still believe that once this pullback ends, we will see another rally to recovery highs -- with yields falling to 3.25% for the five- and 10-year and down to 3% for the two-year. The COT data remains very bullish for the two-, five-, and 10-year. While not perfect, this setup has worked well in the past. (Mark Arbeter, CMT)

The Federal Reserve cut the fed funds rate by 50 basis points (bps), energizing buyers for about 45 minutes yesterday. Then, as often happens, investors faded the first move, stocks were lower into the close, and currently the futures market is through the roof. End of day, the Fed's target is now 4.75%-5.25%. By the last 2024 meeting on December 18, there is a 50% probability that the funds range will be 4.00%-4.25% and a 32% chance the target will be 4.25%-4.50%. Treasury yields across the curve ticked higher, mostly in the five- and 10-year yields, which rose 30 to 40 bps. Market yields have been falling since April in anticipation of a slowing economy and the rate. We are now in the last half of September, and the next two weeks historically are the worst of the year for stocks. Did we front-load those losses during the first four trading days of the month or does the market have pain ahead? Short term, it's hard to get a good feel for what will play out. But we feel confident that the fourth quarter will be kind to investors. The last quarter of the year, especially the months of November and December, are typically two of the strongest months of the year. The other nagging question (and keeping in mind that there are multiple economic reports ahead, 3Q EPS reports in October, and a presidential election in November) is the following. What will lead the market into the end of the year? Over the past three months, leadership has come from Real Estate, Utilities, Financial, Consumer Staples, Industrials, Healthcare, and Consumer Discretionary. That is a broad group. Information Technology is the only sector that has been down over the past three months. (Mark Arbeter, CMT)