It’s Not Just Apple. Why the Tech Stock Rally Is in Trouble.

The mega-cap heavyweights have largely dictated the direction of the market for much of the year. Nvidia is up 216% so far in 2023,

Meta Platforms

rose 148% and

Tesla

increased 104%–the S&P 500’s three top performers.

The Nasdaq Composite had its best first eight months of the year since 2003, and is still up 31%.

While Apple’s two-day fall isn’t going to undo that, it’s certainly exacerbating the recent wobble for tech stocks and raising questions over whether the rally is done. The Nasdaq has fallen every day so far in September.

In truth, the doubts were already there before America’s most valuable company came under pressure from China. That Nvidia stock has failed to hold above $500 even after its blowout earnings and guidance – this was perhaps the first indication of resistance. The AI chip maker has already fallen more than 6% in September.

With earnings season in the past and much of the good news priced in, investors are more eager to punish tech names than reward them right now.

The expected iPhone 15 launch event next week is a potential catalyst for Apple, but it’s unlikely to cure the malaise creeping into tech stock sentiment.

—Callum Keown

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***

Fed Speakers See Policy Heading in Right Direction, But Data Key

New York Fed President John Williams said monetary policy is “in a very good place” but it’s an open question whether the resilient consumer will maintain spending. The remarks, during a Q&A session with Bloomberg, come as the Federal Reserve prepares to meet again on interest rates.

• Williams said the economy may be accelerating in the third quarter but that it would be difficult to maintain a quick pace of growth.
• Demand has been strong since the pandemic, Williams said, rotating spending from goods to services. But the postpandemic excitement to go out again might not last forever. “It’s an open question, there are reasons to think that consumer spending won’t stay strong.”
• Chicago Fed President Austan Goolsbee told Marketplace radio on Thursday that the Fed does have a “golden path opportunity” to get inflation down without a recession. But it hinges on paying attention to the data, he said.
• The argument has shifted from being about how high rates should go to how long they have to stay in that place before the Fed is convinced inflation is heading back to its target, Goolsbee said.

What’s Next: The Fed will get another batch of data to analyze next week, with the release of the consumer price index for August on Wednesday, and producer prices and retail sales on Thursday. The futures market is putting an even probability on a pause or a rate increase in November.

—Liz Moyer

***

Disney And Charter’s Cable Dispute Threatens Another Sports Weekend

The dispute between

Disney

and

Charter Communications
,

the no. 2 cable distributor, will be in the spotlight this weekend as Spectrum users remain cut off from watching major sporting events, including the finals of the U.S. Open tennis tournament.

• Disney and Charter are still sparring over fees for content. Disney had urged sports fans who subscribe to Charter’s Spectrum, the service that Disney has removed ESPN and ABC from, to subscribe to Hulu instead.
• Charter CEO Chris Winfrey said Thursday that ESPN and other Disney channels could permanently be removed from his company’s services. Charter’s customers have been without access since Sept. 1, which already affected the first weekend of U.S. Open tennis and the start of college football. The NFL’s Monday Night Football starts Sept. 11.
• The dispute has hit Disney’s stock price, which has fallen close to a 10-year low.
• It’s a proxy battle in an industry-wide debate over the future of television–specifically, what pay TV looks like in the streaming age. Disney wants to keep the status quo in which subscribers pay one price for a bundle of channels whether they watch them or not. Charter is pushing for more flexibility for “skinnier” packages, likely at a lower price.

What’s Next: Disney is more likely to cave first because it has more to lose if people stop paying for sports services like ESPN altogether.

Oppenheimer

estimates this dispute alone could cost the company $4 billion in yearly free cash flow.

—Jack Hough, Eric J. Savitz and Nicholas Jasinski

***

Google, Justice Department Set to Face Off in Federal Court

The Justice Department will make its case against Big Tech starting Tuesday, squaring off against

Alphabet
’s

Google in a District of Columbia federal court. A federal judge will decide if Google illegally abused its influence over online search to suppress competition.

• The showdown comes as tech companies, with dominant presences in commerce, information, entertainment, and labor, seek to expand artificial intelligence. It could be the biggest antitrust case since the Justice Department took on Microsoft, lawyer Rick Rule told MarketWatch.
• The trial marks the culmination of the U.S. government’s anticompetition investigations into Google and other Big Tech companies in recent years and is a major test for Google’s business empire. It commands 91% of the global search engine market, according to Similarweb.
• Justice Department officials say Google illegally leveraged agreements with phone makers such as

  Apple

  Advertisement – Scroll to Continue

  
  

  and

  Samsung Electronics

  and with internet browsers like Mozilla to be the default search engine, preventing smaller rivals from gaining access.

• Google says its deals with Apple and others weren’t exclusive and that consumers can change their devices’ default settings to other search engines. “People don’t use Google because they have to, they use it because they want to,” said Kent Walker, president of Google’s Global Affairs.

What’s Next: Alphabet reached a settlement in a long-running antitrust case concerning its app store with 36 states and Washington, D.C., led by Utah. A separate antitrust case brought by the Justice Department and states over Google’s advertising business is expected this spring.

—Janet H. Cho and MarketWatch

***

Despite Strike Fatigue, Hollywood Deals Keep Flowing

The Hollywood strike is weighing on the industry, but that’s not stopping acquisition activity. The family investment vehicle of French billionaire Francois-Henri Pinault is taking on Creative Artists Agency, while former Treasury Secretary Steven Mnuchin took a stake in studio

Lions Gate Entertainment
.

• Pinault’s Artémis is buying a majority stake CAA from private-equity firm TPG, valuing the talent agency at $7 billion including debt, The Wall Street Journal reported. CAA represents Tom Hanks, Reese Witherspoon, and Pinault’s wife, Salma Hayek.
• CAA also represents thousands of professional athletes in football, soccer, and other sports, along with political figures. The stake helps Pinault’s holding company diversify beyond Europe and its luxury goods investments, including Christie’s auction house and Puma sports.
• Mnuchin’s private-equity firm has a 5.5% stake in Lions Gate Entertainment, the studio behind the John Wick and Hunger Games movies. Liberty Strategic Capital filed a form suggesting it might propose changes to company management.
• The move puts Mnuchin in the top five owners of Lions Gate’s voting stock. The largest is Lions Gate’s chairman Mark Rachesky’s MHR Fund Management, which has a 24% stake, according to FactSet.

What’s Next: Lions Gate is preparing to close a $500 million acquisition of Entertainment One’s TV and film assets, with plans to divide studio and streaming operations.

Hasbro

is selling eOne, in a deal expected to close by the end of the year.

—Janet H. Cho and Ed Lin

***

Freddie Mercury Memorabilia Auction Draws Crowds at Sotheby’s

An auction of items once owned by British rock star Freddie Mercury took in a higher-than-expected $15.4 million at Sotheby’s in London, including $2.2 million for the Yamaha piano on which he composed “Bohemian Rhapsody” and other hits. The auction’s second and third installments happen today.

• Mercury, the Queen frontman who died in 1991, was an eclectic collector of artwork, furniture, and feline-inspired décor who had aspired to lead the Victorian life “surrounded by exquisite clutter.” His lifelong friend Mary Austin said there was nothing Mercury loved more than an auction.
• The live, black-tie event drew 2,000 bidders from 61 countries. A graffiti-covered door item prompted a chant of “We Will Rock You,” and sold for $521,000. Autographed handwritten lyrics to “Bohemian Rhapsody,” almost entitled “Mongolian Rhapsody,” drew $1.8 million.
• Mercury’s stage costumes were popular, including $801,500 for the jeweled crown and scarlet cloak he wore in his “Magic” tour, and $256,500 for his rainbow-colored satin appliqué jacket.
• A serpent-shaped silver bangle Mercury wore in the “Bohemian Rhapsody” video sold for $882,000, setting a record for the highest price ever paid at auction for a rock star’s jewelry, Sotheby’s said.

What’s Next: The final three online auctions start Sept. 11 and run through Sept. 13. Austin plans to donate an undisclosed portion of the proceeds to charity, including the $344,000 from the sale of a Cartier onyx-and-diamond ring that Elton John gave Mercury.

—Janet H. Cho

***

Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Apple was under pressure after The Wall Street Journal reported China would ban the use of iPhones by government officials at work. The stock’s value has dropped how much since Tuesday?

a. Almost $50 billion

b. Almost $100 billion

c. Almost $150 billion

d. Almost $200 billion

2. Denmark’s

Novo Nordisk
,

booming on the popularity of its weight-loss drug Wegovy, has leapfrogged which of the following firms to become Europe’s most valuable company?

a. Airbus

b.

LVMH

c.

Anheuser-Busch InBev

d.

L’Oréal

3. U.K.-based chip designer Arm Holdings is gearing up to be the biggest initial public offering of the year, attracting pledges from companies like Nvidia and Intel to buy shares in the sale. The SoftBank-owed firm is targeting what valuation range?

a. $50 billion to $55 billion

b. $60 billion to $65 billion

c. $70 billion to $75 billion

d. $80 billion to $85 billion

4. Summer movie blockbusters such as Barbie helped boost theater attendance, with box office sales reaching $4 billion between May and Labor Day for the first time since when?

a. 2017

b. 2018

c. 2019

d. 2020

5. Oil prices got a jolt when the Saudi Arabia-led Organization of the Petroleum Exporting Countries and ally Russia extended daily production cuts through the end of 2023. How many barrels a day are they cutting, together?

a. 1.0 million barrels

b. 1.3 million barrels

c. 1.6 million barrels

d. 1.9 million barrels

Answers: 1(d); 2(b); 3(a); 4(c); 5(b)

—Barron’s Staff

***

—Newsletter edited by Liz Moyer, Brian Swint, Rupert Steiner and Steve Goldstein