Markets

Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Most of the rough sledding in the U.S. stock market this year has been attributed to the negative effects of "lower for longer" oil prices and the slowing of the Chinese economy.

Those are undeniably negative catalysts, but there's another simple catalyst at play that doesn't get quite as much attention: Shares of Apple, the largest company by market value, have been punched in the gut in the past year. Apple's stock has plunged 25 percent since its last record closing price on Feb. 23, erasing almost a quarter-trillion dollars in market value. 

When looking for individual stocks to blame for either this year's plunge or the longer-term retreat in the S&P 500 since its peak on May 21, Apple stands out decisively.  The stock has shaved 20.4 points off the index since its May record, almost four times the next biggest contributor, Exxon Mobil.  

Apple Takes Bite Out of Market
Shares of Apple have by far been the biggest drag on the S&P 500 since its peak in May.
Source: Bloomberg

As far as correlations go, Apple is far more correlated to the S&P 500 than either the Chinese stock market or crude oil, even though the latter two are moving much more in tandem with U.S. equities than in the past. As such, it's hard to entirely separate the cause and effect: The market is (at least partly) down because Apple's down, but Apple also is maybe (at least partly) down because the market is down amid all those other issues mentioned above.

Market Doesn't Fall Far From Apple
Shares of Apple are more tightly correlated to the S&P 500 than Chinese stocks or oil.
Source: Bloomberg
Note: Based on 120-day correlation coefficients. Asset prices move more in tandem as coefficient nears 1.

The knock on Apple has long been that it's too reliant on revenue growth from a single product, the iPhone, which made it a company with growth-stock characteristics trapped in value-stock valuations. That, in turn, has left the stock market in the U.S. and Asia highly exposed to a single product -- Apple has hundreds of suppliers around the world (read here for more about which ones are most closely tied to the company).  

The stock played an outsized and well-publicized role in helping the market rally during the heyday of the bull market, posting a gain of more than 1,000 percent from March 9, 2009, to its peak on Feb. 23.  Now, it's playing an outsized role in the downdraft.

Apple's weakness is being reflected by suppliers, which have reportedly received reduced orders for iPhone parts. That makes Tuesday's earnings report from Apple arguably as important for the entire market as any piece of Chinese economic or oil-inventory data. Even more important will be eventual clues for how much demand exists for the new iPhone 7, expected to be released in September. 

Apple is not the only thing ailing the stock market, but as far as single stocks go it's still obviously the most important.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net