Just a couple of quick observations on how the market is now pretty much "all Apple." Using David Kostin's previously published data, the first chart below shows that Apple alone accounts for a substantial portion of the best margin performing group in the S&P: Information Technology. Indeed, as the second chart shows while most sectors have been cutting their margin forecasts for H2, with a particular emphasis on materials, healthcare and industrials, one sector has been doing surprisingly well: InfoTech. And of this, Apple is the dominant margin leader. As Kostin says, "AAPL was a key contributor to the market’s continued margin expansion." Take away this cult company and the entire market's forecasted margin improvement collapses. Furthermore, as was pointed out previously, and confirming just how massive Apple's role is in the S&P earnings picture, is the fact that Apple (AAPL) which posted revenues $3.9 billion (16%) above expectations and single-handedly contributed a stunning 40% ($0.23) of the $0.57 per share of aggregate EPS surprise for the S&P 500. Upward revisions to AAPL’s 2H sales and earnings expectations contributed much of the Technology sector’s positive revisions." Lastly, "AAPL currently represents 3.2% of S&P 500 EPS for 2Q 2011." Woe to the market if anyone manages to disturb the precious market ecosystem which now relies exclusively on Apple to be the dominant power pushing and pulling everyone else higher. And as more and more market making power is delegated to the cult, what happens when one day, inevitably, Apple disappoints?
Infotech Margins with and without Apple:
Who did what to margin forecasts this earnings season: