Saudi Aramco overtook Apple Inc. as the world's most valuable company, fueled by a surge in oil prices that is buoying the crude producer while adding to an inflation surge that is throttling demand for technology stocks.
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None of the US outstrip forecasts are showing signs of inflation persisting.
Aramco traded near its highest level of record on Wednesday, with a market value of $2.43 trillion, surpassing Apple's market value for the first time since 2020. The iPhone maker fell 4.4% in New York to $147.53, giving it a valuation of $2.38 trillion.
Even if the move proves short-lived and Apple takes the top spot again, the role reversal underscores the power of major forces that are moving through the global economy.
Inflation is increasing that is forcing the Federal ReserveFederal Reserve to rise interest rates at the fastest rate in decades, despite the fact that they are great for profits at Aramco. The higher rates go, the more investors discount the value of future revenue flows from tech companies and push down their stock prices.
You can't compare Apple to Saudi Aramco in terms of their businesses or fundamentals, but the outlook for the commodity space has improved. James Meyer, a chief investment officer at Tower Bridge Advisors, said they were beneficiaries of inflation and tight supply.
Apple has a market value of $3 trillion, about $1 trillion more than Aramco s. Apple has fallen 19% since then, while Aramco is up 27%.
It may be a while until tech regains dominance, according to Tim Ghriskey, Senior Portfolio strategist at Ingalls Snyder, with the Fed on pace to raise rates by at least another 150 basis points this year, and with no hope of a resolution for the conflict in Ukraine.
There is a panic selling in a lot of tech and other high-multiple names, and the money coming out of there seems to be headed in particular for energy, which for now has a favorable outlook, given commodity prices, he said. Companies like Aramco are benefitting from this environment. Concerns over inflation and a more aggressive Fed have led to the weakness in technology shares this year. The difficulties it is facing due to supply constraints was underlined by Apple's recent results. The stock is still seen as a relative safety play within the sector, given its steady growth and balance-sheet strength that has limited its decline this year. The stock's year-to-date drop is smaller than the 24.8% decline of the Nasdaq 100 Index.
Apple is the largest stock among U.S. companies. Microsoft Corp., in second place, has a market value of $1.96 trillion.
The S&P 500 Energy sector has gone from $78 a barrel to $108 this year, which has increased by a rally in the price of Brent crude oil. Occidental Petroleum Corp. is the top performing stock in the S&P 500 this year, with a 108% advance.
In a bear market, buyers aren't interested in fair value, they want cheap values, and I think buyers won't stay on strike until we see more pain and prices look even more attractive, said Meyer at Tower Bridge.
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