Apple’s big annual conference is this week. This is why it’s so important for the stock market rally

Published Mon, Jun 6 202211:57 AM EDTUpdated Mon, Jun 6 20224:45 PM EDT

Patti Domm @in/patti-domm-9224884/@pattidomm

Apple's hefty market capitalization means a big day for the stock could be an important one for the market. Traders are watching the company's Worldwide Developers Conference — known as WWDC — for major headlines. The biggest U.S. company by market cap kicked off this week's annual developers' conference at 1 p.m. ET Monday. Apple's stock was higher ahead of the event, but it lost most of its gains and closed up just a half percent at $146.14. Apple holds a lot of sway over the broader market indexes, since it is in the Dow, the S & P 500 , and the Nasdaq Composite. It also is a big part of the Invesco QQQ ETF , which is based on the Nasdaq 100. "If they sell the event, and Apple goes red, it's going to be hard for the S & P 500 and the QQQs to show traction," said Scott Redler, chief strategic officer at T3Live.com. "If Apple shows some power, that could fuel the move." Redler said it would be important for the stock to hold at $148 apiece. "It could pop back to the range of last week, which would help the market," said Redler, who follows short-term technicals. But shares of the tech giant ran out of steam Monday after touching a high of $148.57, ahead of Apple's event. Apple's high was $151.74 last week, and its high Friday was $147.97. For the S & P 500, surpassing last week's high of 4,176 would be a positive, and it could then retrace toward 4,200, Redler said. The index got as high as 4,168 Monday, before closing at 4,121, up 0.3%. "Apple is not the only key. A lot of things are going to have to go right for the S & P 500 get back above and stay above 4,176," he said. Redler said he was watching to see if Apple released news on an augmented reality headset. Apple did announce a new MacBook Air, a MacBook Pro, a new M2 chip, and iPhone software. Apple also unveiled Apple Pay Later, a buy-now-pay-later product. However, company officials made no mention of the headset Monday, so the next chance for investors to hear any progress on the widely anticipated product would not be until later this year. New products are key Pierre Ferragu, head of the global tech infrastructure research team at New Street Research, said the conference is more about software. If there were some significant hints for developers about the headset that would make analysts begin modeling headset revenues for next year, he added. "The company has grown earnings more than 20% a year over the last five years," Ferragu told CNBC . "The key question is ... can Apple continue to deliver on that double-digit earnings growth over the next five years?" Ferragu said new products are the key for Apple. "So the more incremental we learn about the headset this week, the more likely a 2023 launch is and the more likely this headset can have a positive influence on earnings growth over the next five years," he said. Morgan Stanley analysts note that over 10 years, Apple's event hasn't been a major catalyst, and its stock underperformed by 100 basis points in the week following the event. One basis point equals 0.01%. But more recently, they note that Apple's stock performance has been more positive following the event. "However, over the last three years, Apple's stock performance following WWDC has been more pronounced, outperforming the S & P 500 by ~400bps in the week following the event, and ~800bps in the month following WWDC ... indicating that perhaps Apple's summer developer conference has become a more important stock catalyst than in prior years," wrote Morgan Stanley's Erik Woodring. Rocky times ahead for shares? Even with good news, some chart analysts see problems ahead for Apple stock. John Roque, head of technical strategy at 22V Research, said in a recent note that Apple has a weak technical story, trading below its downward sloping 50- and 100-day moving averages. He said it is also in negative territory relative to its monthly momentum indicator. He noted that Apple has faced three big setbacks in the last decade. From September 2012 to June 2013, shares lost 45%; from April 2015 to May 2015, they fell 34%; and from October 2018 to January 2019, shares declined 39%. On Friday, he noted that Apple was 25% from its January peak to its May low, based on its closing price. Roque said support is currently at $140. "A break of 140, which we believe occurs, will imply a price target of 100," he wrote. Bespoke notes that Apple's 4% decline Friday put it in a "death cross," or a negative chart pattern that occurred when the 50-day moving average fell below the 200-day moving average. The 50-day moving average is a shorter-term momentum indicator, simply calculated based on the average of the last 50 closing prices. There have been two other "death cross" formations for Apple in the past 20 years and the stock was negative over the next month and week, according to Bespoke. But Apple was up by double digits a year later. In 2008, Apple was down 10.4% a week after shares formed a death cross, Bespoke found. Shares declined 22.6% a month afterward, but then gained 46.3% a year later. In 2018, Apple fell just 0.4% a week after forming a death cross and were basically flat a month later. A year after it made a death cross for the second time, shares surged 78.2%. Peter Boockvar, chief investment officer at Bleakley Advisory Group, said expectations may be too high for positive news from the developers' conference. He said there are three big issues for Apple. First, there is the state of the consumer and the appetite for its products. Second, there are the impacts of Covid shutdowns and the Chinese economy on Apple's business there. Finally, there's the state of its supply chains. "Apple because of its market cap is the most important stock … but the big question people will have with Apple aren't going to be answered today," Boockvar said. JPMorgan reiterated its overweight rating on the stock Monday, saying that its survey checks show lead times for Apple products have remained stable. The stock fell sharply Friday, after Morgan Stanley analyst Katy Huberty said she was bullish longer term but was concerned about deceleration in Apple's App Store growth. --CNBC's Michael Bloom contributed to this report

Customers walk past an Apple logo inside of an Apple store at Grand Central Station in New York.

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