While not quite as impressive as the 02/15 sell-off in terms of volume or size, today's weakness in Apple's stock price was the 3rd largest drop in 3 months as we note implied vol pushed up once again mimicking the pattern from mid-Feb as the stock lost over $21.5 from high to low in a very flash-crash style around 1110ET. As both realized volatility and implied volatility increase, perhaps some of the 200+ hedge funds will allocate some risk budget away from the Apple or change mandates so that their bogeys are AAPL. Apple's weakness weighed on most other high-beta assets with High yield credit lower and only Utilities and Staples managing a positive close among S&P sectors (financials were mixed in stocks but CDS were wider). Somewhat interestingly, Treasuries sold off all day and modestly steepened and while FX markets drifted very modestly higher for the USD after the European close (despite some overnight JPY strength - risk-off), ES (the e-mini S&P futures contract) synced back with an underperforming CONTEXT (broad risk asset proxy) into the close as WTI regained $107 (along with strength in commodities) and AUDJPY improvement.
[7]
AAPL was leaking lower off a solid open broadly in sync with European market weakness (with some support at Friday's VWAP - blue horizontal line) but as soon as it crossed Thursday's closing VWAP (yellow line), the sell-off accelerated and had the look and feel of a flash crash given the volume surge and size of the move.
[8]
The machines managed to creep the price back up to today's VWAP (red line and arrow) but from there it sold off and dragged the broad market with it and still managed one of its bigger drops.
[9]
Comparing the very recent acceleration in AAPL's stock price (black) with its equity option implied vol shows three main things. 1) from the mid Q3 sell-off and initial rally at Thanksgiving, implied vol and stock price have moved inversely as we would expect; 2) at the start of the year, its clear managers sought protection and bid up volatility (the first green box) as we see AAPL stock rise and so does vol. This seemed to provide the ammunition for the significant sell-off mid-Feb (on NASDAQ re-weighting rumors) to bounce back, as protection owners covered and the lower vol, higher price relationship reset to take us to new highs - which leads us to the last week or two; 3) a similar protection buying binge into the AAPL rally has occurred but this time on a much smaller scale than previously - which means there is significantly less ammo (shorts forced to cover/take profits) if we manage a rally off these levels.
[10]
Broadly speaking, risk assets stayed in sync with US equities today aside from early downward pressure (that was absorbed) when JPY strength forced CONTEXT [11]lower as carry FX drivers dragged it down. By the afternoon, stocks and broad risk assets (despite TSY weakness - which was outweighed by the 2s10s30s carry driver) were back in sync and close that way.
Charts: Bloomberg