Is Apple's Einhorn Fight Pulling Down the Dow?

It's always tempting to blame a hot headline for moving the broader stock market. But as compelling as news stories about Apple (NASDAQ: AAPL  ) are, today's big drop in the Dow Jones Industrials (DJINDICES: ^DJI  ) , which are down 122 points as of 10:55 a.m. EST, is less about Apple than about overall economic concerns. Earlier today, Chicago Fed President Charles Evans said he doesn't expect the unemployment rate to fall below the Fed's new 6.5% target until mid-2015, throwing cold water on more optimistic economic data that has come out in recent months. With Evans saying he thinks quantitative easing may need to continue into 2014, investors have to wonder whether the Fed's exit strategy will ever pan out the way everyone hopes.

Apple's shares barely budged this morning, but the company is attracting plenty of attention after activist investor David Einhorn filed suit against the iDevice giant, harshly criticizing the company's capital-allocation practices. Einhorn's argument is simple and common among investors: He says it makes no sense for Apple to hold on to huge amounts of cash on its balance sheet. While Apple wants to eliminate the option of issuing preferred stock, Einhorn would rather see the company issue new securities paying higher dividends that will move some of that cash off the balance sheet and, in his view, unlock shareholder value.

Within the Dow, Coca-Cola (NYSE: KO  ) was a rare winner, climbing more than 1.3% in advance of its earnings release next Tuesday. Analysts expect modest earnings and revenue growth from the beverage giant, even as headwinds like health concerns have called the soft-drink industry's future into question. The big question is whether emerging-market growth can make up for any sluggishness in the core North American market, and, for today at least, investors seem to think the answer is yes.

Finally, Akamai Technologies (NASDAQ: AKAM  ) plunged 16.5% after the company missed revenue estimates in its fourth-quarter results and gave a weak forecast for revenue and margins in the current quarter as well. Better-than-expected fourth-quarter earnings weren't enough to bolster the dot-com's shares, as investors have come to rely on strong growth numbers to justify the stock's high valuations.

Will Einhorn crush Apple?
Apple has been controversial lately, with many investors questioning whether Apple remains a buy. Get the answers you need from Motley Fool senior technology analyst and managing bureau chief Eric Bleeker, who will fill you in his latest thoughts on the tech giant. Simply click here now.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2242328, ~/Articles/ArticleHandler.aspx, 8/29/2014 8:16:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement