Apple Needs to Show Some Spark as Shoppers Favor Services Over Stuff

While inflation is an imperfect measure for demand, it is notable that services prices jumped 0.8% in March after a 0.7% gain in February, while durable-goods prices inched 0.1% higher following a 0.9% drop in February. Expect a similar showing in the April consumer price report that is released on Friday.

Apple’s stock has been a bit rotten of late, shedding 18% this year. That is hardly the worst tech stock, and in fact is a slight outperformance of the broader

Nasdaq Composite,
which has shed 23%. Now the world’s second-largest company by market capitalization after

Saudi Aramco
,
Apple could use a little spark.

Apple is expected to unveil a new watch, and possibly a new MacBook Air, at its worldwide developers conference Monday. Like

Meta Platforms
,
Apple is looking at more futuristic products, which it may show off as well. The New York Times reported the company has enlisted Hollywood directors to develop video content for an augmented-reality headset.

The challenge facing Apple and its rivals is to weather an economy that is no longer working in its favor, while setting the stage for a more lucrative environment down the road.

—Steve Goldstein

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***

Apple Seen Unveiling Upgrades to iPad, Watch, MacBook

Apple kicks off its Worldwide Developers Conference today at 1 p.m. Eastern time in a digital-only format, with high expectations for updates to its iPad operating system and Apple Watch and possibly a glimpse at the headset for virtual and artificial reality.

• The iOS 16 upgrade is expected to have changes to the lock screen, messaging, and heath features, according to Wedbush Securities analyst Dan Ives. He also said Apple could introduce the next MacBook Air.
• There are also high hopes for a glimpse at Apple’s AR/VR technology, as competitors such as Meta Platforms are already out with their own headsets.
• The iPhone maker is expected to make significant upgrades to the iPad that will make the device seem more like a laptop, according to Bloomberg. The upgrade will make it easier for people to see which apps are open and easier to switch between tasks, the report said.
• The company is expected to upgrade its Watch’s fitness-tracking component and a new low-power feature to improve battery life. A possible new MacBook Air could feature an upgraded M2 chip, Bloomberg also reported.

What’s Next: The much anticipated AR/VR headset, Apple Glasses, is expected to make an appearance by the holiday season or early 2023, Ives said in a note.

—Liz Moyer

***

Amazon’s Split Doesn’t Mean Much, but Could Boost Price

Amazon.com
’s
stock will have a very different price when it starts trading this morning. After a 20-for-1 split from Friday’s closing price of $2,447, the shares are expected to open around $122 each.

• Shareholders simply get more shares for every one they hold and the price of each is lower—but it could boost the stock’s trading price. At $122, the new purchase price is more attainable to people who want to own a whole share but were deterred by the presplit price.
• A lower price also makes Amazon a contender for inclusion in the

  
  Dow Jones Industrail Average,
  an index that weights components by price. A high-price stock moves the index more than a low-price one, and a four-figure stock would wield outsize influence.

• The last change to a Dow component was in 2020, when

  
  
  Amgen
  ,

  
  
  Honeywell
  ,
  and

  
  
  Salesforce
  
  swapped in for

  
  
  Exxon Mobil
  ,

  
  
  Pfizer
  ,
  and

  
  
  Raytheon
  .
  Amazon has split four times since 1997.

What’s Next: The split may also drum up general enthusiasm for the stock, which is down more than 26% this year. A split suggests management is confident, and points to underlying financial success.

—Liz Moyer

***

Elliott Sues London Metal Exchange for $456 Million

Activist hedge fund Elliott Management, founded by billionaire Paul Singer, is suing the London Metal Exchange for $456 million after it suspended and canceled nickel trades earlier this year when prices spiked.

• Hong Kong Exchanges & Clearing, the parent of the LME, announced that the lawsuit had been filed and that it would contest the charges. The LME “believes the judicial review is without merit,” the company said.
• The LME suspended nickel trading on March 8 and retrospectively canceled transactions after Russia’s invasion of Ukraine caused the price of the commodity to rise sharply.
• The move effectively protected those who had bet against the surprise swing and punished those who stood to profit from it.
• The Hong Kong exchange said the nickel market had become “disorderly” and that it always acts in the interest of the market as a whole.

What’s Next: The lawsuit is just one of the headaches the LME is facing over the canceled nickel trades. U.K. financial authorities also are investigating.

—Brian Swint

***

Tax Collections Boosted Toward Record $2.6 Trillion

Individual income tax collections could reach a record $2.6 trillion in the federal government’s fiscal year, which ends in September, according to the Congressional Budget Office. Capital gains and business income appear to be the cause for the surge, The Wall Street Journal reported.

• The Journal cited the Penn Wharton Budget Model estimates, which said collections of nonwithheld taxes reached an inflation-adjusted $522 billion in April 2022, compared with just over $300 billion in 2018 and 2019.
• Inflation at decadeslong highs, a bull stock market rally, and trillions of dollars in federal stimulus aid helped. People sold investments and spent that government aid.
• CBO analysts said a greater than typical share of capital-gains taxes paid were short-term, at rates up to 40.8%, instead of the lower 23.8% for long-term gains, the Journal reported. Higher-income people saw income growth, taxed at higher rates.
• Lawmakers return to Capitol Hill this week and will face a fast-tracked legislative response to gun violence but also will feel pressure as President Joe Biden takes on his economic agenda ahead of the midterm elections.

What’s Next: Inflation continues to be a top talking point for members of both parties. Treasury Secretary Janet Yellen is scheduled to testify on the administration’s budget in the Senate on Tuesday and the House on Wednesday.

—Liz Moyer

***

This Week: Consumer Prices, Sentiment, Pfizer Investor Day

Corporate earnings season has mostly wound down for the quarter, with

J.M. Smucker
,

Campbell Soup
,
and

DocuSign

among the few on tap this week. But the main focus for analysts will be the latest U.S. inflation reading, coming out on Friday.

• The Bureau of Labor Statistics’s consumer price index for May is expected to increase 8.2% year over year, compared with a 8.3% jump in April. The core CPI, which excludes volatile food and energy prices, is seen rising 6%.
• Pfizer will have a meeting for investors today to discuss expanding access and affordability to the company’s drugs and vaccines.

  
  
  Advanced Micro Devices
  
  will host financial analysts on Thursday to lay out its product road map.

• The European Central Bank announces its monetary-policy decision on Thursday. The ECB is expected to keep its deposit rate unchanged at negative 0.5%, where it has been since September 2019.
• The University of Michigan’s consumer sentiment index for June will also come out on Friday. Economists forecast a 58.8 reading, slightly higher than May’s 58.4. The May figure was the lowest for the index since August 2011.

What’s Next: Facebook parent Meta Platforms begins trading under its new ticker, META, on Thursday. This completes a rebranding effort, which began last year, as the social-media company pivots to the metaverse that it plans to build out.

—Liz Moyer

***

MarketWatch Wants to Hear From You

I’m newly self-employed. Is there a tax benefit to hiring my children to work at my business over the summer?

A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to [email protected].

***

—Newsletter edited by Liz Moyer, Camilla Imperiali, Brian Swint, Joe Woelfel