Apple email may have halted total collapse

TORONTO North American stocks tanked Monday morning, as fears of a stalling China spread like a forest fire on Bay Street and Wall Street. Then, the market clawed its way back, erasing some of those losses, and one U.S. equity analyst is crediting a rare email written by a U.S. tech titan for taming the blaze and saving the day.

The email message that Daniel Ives, an analyst at FBR Capital Markets & Co. in New York City, is referring to is the one sent to Jim Cramer, host of CNBC’s Mad Money, by Tim Cook, chief executive of Apple Inc., which is seen by many as a litmus test of the health of the Chinese economy. According to an image of the note posted on Twitter by one of Cramer’s colleagues, Cook said that iPhone activations in China had accelerated during the past few weeks and that the past two weeks were the best for the App Store this year.

“Tim Cook’s email to CNBC, in my opinion, potentially stopped a market collapse. It was that material,” Ives said in a phone interview. “Apple and China is at the epicentre, so for Cook to publicly come out and highlight some of the positives that are happening in China, at least temporarily, quelled a lot of fears.”

Shares of Apple opened the day at US$92, plunging more than 13 per cent from Friday’s closing price, but began a steep climb soon after the bell rang in New York. By lunchtime, the beloved stock was trading as high as US$108.80, amassing a three per cent gain, before closing down 2.5 per cent lower.

It was a see-saw day for many indexes and stocks, especially in the tech sector.

“You see a lot of investors trying to pile into the elevator at the same time and hitting the exit button,” Ives added. “Just as these stocks might have overshot on the high end in terms of bullishness, I think now they have overshot on the low end in terms of bearishness. Fear breeds opportunities,” since the concerns about China and how it can effect technology companies, specifically, could be “overblown.”

David Baskin, president of Toronto’s Baskin Wealth Management, which oversees $800 million in assets, said the resilience of the market signalled to him the gulf between the China’s stock market and consumer.

“In the first five minutes this morning, we saw outright panic and absolute craziness going on,” Baskin said in a phone interview. “Then, at some point, people started noticing that a lot of really good stocks were really cheap and started buying them back.” He describes the day as “not fabulous, but not a catastrophe.”

He said shares of Google Inc. and Microsoft Corp. also bounced back spectacularly on Monday. His firm owns all three on behalf of clients. Baskin wondered whether Cook should have disclosed the details about Apple’s performance in China in a filing, rather than in an email to Cramer. “You’re not allowed to disclose material information to one party,” he said.