Apple’s 4th quarter earnings report broke records and sent the company’s stock price to another record high closing above $500 for the first time ever with Apple’s market cap reaching close to $500 billion.
However, Apple’s massive success has had some unforeseen side effects, mainly massive skewing of important market indices like the S&P 500. Since 1957 the S&P has published the prices of 500 large-cap stocks traded on both the New York Stock Exchange or the NASDAQ. The S&P earnings increased 6.6 percent year-over-year during the 4th quarter with Apple’s monster earnings included. Without Apple, the S&P only increased 2.8%.
Apple’s share of the S&P 500 stands at 3.8% which is greater than Exxon's (3.3%), Microsoft's (1.9%) and IBM’s (1.85%). Apple’s outlier status caused Morgan Stanley, Barclays Capital, Goldman Sachs, Wells Fargo and other institutions to publish market updates excluding Apple.
Apple has effectively become so large, and recorded earnings so great, that financial institutions are now ignoring the company. Apple’s influence becomes even more apparent when pairing the S&P 500 down to just tech companies. With Apple S&P tech companies had an estimated 21% annual earnings increase. Without Apple, that number shrinks to 5%.
"What’s happening with Apple is real, because Apple’s earnings are real and any wealth accruing to Apple gets into the hands of U.S. shareholders. But to actually be able to look at trends and look at what’s happening to [other companies], not just the one that’s so exceptional, it is important to strip Apple out." — Barry Knapp of Barclays Capital.