Will Apple and Microsoft finally give way in light of the stock market slump?

The stock market continued to make significant highs and lows during the trading session on Thursday. Market participants have a lot of difficulty in deciding whether the major macroeconomic factors affecting Wall Street are short-term in nature or will have long-term effects, and as attitudes change, stock market moves have been violent. As of 12:30 PM ET, Dow Jones Industrial Average (^ DJI -1.35%) It fell 187 points to 31,647 points. The Standard & Poor’s 500 (^ GSPC -1.20%) 16 points fell to 3,919, and Nasdaq Composite (^ IXIC -1.05%) He gave up 4 points to 11361.

Until recently, technology stocks had a giga cap like apple (AAPL -4.10%) And Microsoft (MSFT -2.87%) Companies have avoided the brunt of the Nasdaq bear market, even with smaller companies losing 50% to 80% or more of their value. However, over the past two months, including some of the largest companies in the market ID pads (FB 0.47%)And Netflix (NFLX 3.53%)And Amazon.com (AMZN 0.22%), began to move sharply lower. Those big-name moves put a bigger impact on the market capitalization-weighted parameters.

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But along the way, Apple and Microsoft have largely avoided the brunt of the economic downturn. That has changed this week, and today, both companies are seeing bigger losses from the broader market as investors try to assess whether to give way to negative market sentiment.

strong basics

For the most part, Apple and Microsoft have been able to stand up to scrutiny due to their strong financial performance. For example, Apple’s numbers for the second fiscal quarter ending March 26 included a 9% increase in total revenue and a 6% increase in net income. The tech giant saw notable results from the iPhone, Mac, and wearables and accessories sectors, which helped offset some of the weakness in iPad sales. Apple also continued to grow its significant services business, which was seen by some as a potential weak link amid increasing competition in areas such as content streaming.

Similarly, Microsoft has done a good job of capitalizing on opportunities to serve customers who are more involved in cloud computing. Microsoft’s intelligent cloud segment recorded the largest increase in revenue among its businesses, driven by the popularity of the Azure cloud infrastructure platform. Other areas of Microsoft’s business also owe much of its success to the cloud, particularly the subscription-as-a-service versions of the Office productivity suite. An 18% increase in sales helped boost adjusted net income by 13% in the third quarter of the fiscal year ending March 31, and the software giant continued to return capital to shareholders through buybacks and dividends.

Holes in the armor?

However, both Apple and Microsoft have seen some declines in their stock prices in the past week. Apple stock is down 3% Thursday afternoon, and has fallen nearly 15% since May 4. Microsoft suffered a 12% drop in just over a week, including a drop of more than 2% in today’s session.

Apple and Microsoft are highly liquid stocks, which makes them less vulnerable to certain situations that could cause more dramatic movements in small-cap stock prices. Index funds already own huge amounts of their shares. To the extent that long-term investors have kept track with their index holdings, this has helped provide a heft to Apple and Microsoft stock prices.

However, impatient investors began recording large inflows of their financial holdings. Forced selling of index funds can have an impact on stock prices even for the giants of big tech stocks, most notably because their weightings in different indexes tend to be very high.

There is little to suggest anything is wrong with Microsoft or Apple regarding its long-term business prospects. With that said, short-term traders will be watching the two stocks to see if they can avoid further losses here. If they prove to be at risk of deflation, some traders will see this as evidence that a more comprehensive downturn in the market as a whole may be in the future.

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