What happened
Shares of Apple (AAPL -0.69%) traded 5.7% higher near 1:45 p.m. EDT. The smartphone giant rode a wave of optimism sparked by some good-looking COVID-19 statistics over the weekend, and the iPhone maker's jump also inspired big price increases for many of its leading suppliers of smartphone parts. Radio-signal chipmaker Skyworks Solutions (SWKS -0.05%) gained as much as 10%, display technology researcher Universal Display (OLED -1.54%) peaked at 9.8%, wireless data security expert NXP Semiconductors (NXPI 0.36%) posted a 13.2% gain at most, and mobile memory chip maker Micron Technology (MU 2.91%) boasted a 10.4% gain at press time.
So what
New York governor Andrew Cuomo reported a drop in the daily number of coronavirus deaths in his state and also indicated that New York might be near the peak number of active COVID-19 cases. That was enough to spark a broad Wall Street rally on Monday. If we're getting close to the peak of this crisis, maybe we're ready to stop this social isolation experiment and get back to work as usual, right? And when that happens, the economy turns back up, people who were furloughed or fired get their jobs back, and the refreshed stream of American paychecks will be ready to invest in brand new smartphones again.
The Trump administration can't wait to get the country back on track again, looking for the earliest possible opportunity to get rid of the social distancing framework.
"We have to get back to work," Trump said in his coronavirus briefing on Saturday. "We have to open our country again. We don't want to be doing this for months and months and months."
So America is just about ready to get right back to work, right?
Whoops, not so fast! Image source: Getty Images.
Now what
Unfortunately, the virus crisis won't go away that quickly. The decelerated fatality rate in New York over the weekend could very well turn out to be a statistical anomaly, a brief respite in the middle of an unbroken growth trend. And even if the peak really is around the corner, it'll still be weeks before the "shelter-in-place" and "safer-at-home" orders can be lifted without triggering a brand new wave of COVID-19 infections.
In reality, the government will have to wait until we actually do reach the peak of new coronavirus cases and then work out a sensible timeline based on the data that's available at the time. If that happens this week or fairly soon, that's great, but that yellow wallpaper will still be driving us crazy for a few more weeks. Restaurants will remain closed except for pick-up and delivery options. Movie theaters and theme parks will stay firmly closed. Millions of office workers will continue to get work done remotely, and those millions of furloughed or fired workers still won't get paid.
Some of the businesses on the brink of bankruptcy today will have plenty of time to fall over the edge, even if the infection peak arrived this weekend. We have not seen the end of the economic damage this pandemic will cause, not by a long shot. Monday's stock market bounce will be erased and largely forgotten as the virus crisis continues to develop, and we are not ready to invest in millions of 5G-ready iPhones today.
Apple will absolutely be fine, leaning on a $207 billion pile of cash reserves through this crisis. The component suppliers can't match Apple's massive cash reserves but they really don't have to. Universal Display and Skyworks boast debt-free balance sheets, and Micron isn't far behind with $140 million of long-term debt and $7.5 billion in cash equivalents. NXP is balancing $7.6 billion of buyout-related debt against a smaller cash hoard of $1.1 billion, but the stock is trading at just 6.3 times the company's free cash flows. None of these companies are likely to give up the ghost in the coronavirus crisis.
The stock market makes crazy moves sometimes when investors focus on short-term developments and forget about the larger long-term story. Today, smartphone-related stocks are soaring on flimsy wings. Don't be surprised if the same stocks fall back down before the week is through, maybe even tomorrow.
