MarketView for September 17

Summary

The major equity indexes were lower on Monday in light trading as falling oil prices hit energy shares. The decline ended a four-day run of gains for the S&P 500. The move is primarily a consolidation following last week's upward run. Financials were among the sectors leading Monday's decline. For example, Bank of America ended the day down 2.6 percent to close at $9.30.

An S&P index of energy shares fell 0.8 percent, in sync with oil prices, which fell sharply in afternoon trading. Exxon Mobil ended the day down 0.4 percent to close at $91.91.

The market's losses were limited by Apple’s all-time session high of $699.80, the result of once again phenomenal demand for the Company’s latest product, its new iPhone 5.  Apple booked 2 million orders in one day and pushed the delivery date for some pre-orders to next month. The stock rose above $700 after the bell; it closed at $699.78, up 1.2 percent.

Volume was lower than average, with about 5.64 billion shares traded on the major equity exchanges, as compared with the year-to-date average daily closing volume of 6.54 billion shares. Many participants were out on Monday for the observance of Rosh Hashana, the Jewish New Year.

Shares of Advanced Micro Devices fell 12.7 percent to $3.50 in after-hours trading after the company said its chief financial officer was leaving to pursue other opportunities. The stock closed the regular session at $4.01, up 2.8 percent.

The day's economic data offered more evidence of weakness in the economy. Factory activity in New York State contracted for a second month in a row in September, with the Empire State "business conditions" index falling to its lowest level in nearly 3-1/2 years, according to a report on Monday from the Federal Reserve Bank of New York.

A national manufacturing survey by an industry group earlier this month showed the sector contracted for a third month in August.

Gold and other commodities also fell for the day. JP Morgan cut its ratings on a number of metals companies, including AK Steel, which fell 5.8 percent to $5.53.

The Street also focused its attention on the overseas unrest. Protesters in Afghanistan and Indonesia burnt U.S. flags and chanted "Death to America" on Monday in renewed demonstrations over a film mocking the Prophet Mohammad. Israeli Prime Minister Benjamin Netanyahu warned that Iran would reach the brink of being able to build a nuclear bomb in just six or seven months.

Major Japanese companies, including Nissan and Honda, announced factory shutdowns in China on Monday and Japanese expatriates were urged to stay indoors ahead of what could be more angry protests over a territorial dispute between Asia's two biggest economies.

Within the mergers and acquisitions world, Lowe's announced that it had withdrawn its $1.86 billion proposal to buy Rona in the face of stiff opposition to the unsolicited bid for the Canadian home improvement retailer. Lowe's shares ended the day down 0.6 percent to close at $29.23.

General Electric fell 0.3 percent to $22.05 after sources familiar with the matter said the company has hired Morgan Stanley to review its 33 percent stake in Thailand's Bank of Ayudhya, which could potentially lead to a sale.

iPhone 5 Records a New Sales Record

Apple booked orders for over two million iPhone 5 models in the first 24 hours, reflecting a higher-than-expected demand for the new smartphone and setting it up for a strong holiday quarter. Apple said on Monday that pre-orders outstripped initial supply but it would deliver most phones as planned by Friday, the first day of delivery. Many would not be available until October, however.

It is not unusual for Apple products to sell out the first day but this time around Apple has doubled its first-day sales record. Last October, the company booked 1 million orders for the iPhone 4S, in the first 24 hours. That had beaten Apple's previous one-day record of 600,000 sales for the iPhone 4.The strong preorders could mean a huge holiday quarter for Apple as the iPhone accounts for half of Apple's revenue.

Apple will make initial deliveries of the iPhone 5 by September 21 in the United States and most of the major European markets, such as France, Germany and the United Kingdom. The phone then goes on sale on September 28 in 22 other countries.

Given the demand for the device so far and Apple's aggressive rollout of it internationally, some analysts raised their sales and earnings estimates. Wall Street analysts on average expect Apple to earn 44.25 cents per share in the December quarter.

The new phone, which will appear in stores on Friday for walk-in purchases, has a larger, 4-inch screen and is slimmer and far lighter than the previous model. The iPhone 5 supports the faster 4G network and also comes with a number of software updates, including Apple's new in-house maps feature.

Apple began taking orders for the iPhone 5 at midnight Pacific time on Friday. Shipping dates for the smartphone slipped by a week within an hour of the start of preorders. On Monday morning, www.apple.com showed preorders placed at that time would take two to three weeks to ship.

Wall Street is also keeping a close eye on the supply of the smartphone. Sharp, one of Apple's key suppliers for screens is struggling with high costs and scrambling to raise funds to pay debt.

The latest iPhone comes as competition in the smartphone market has reached a fever-pitch with Apple up against phones that run on Google's Android software. Android has become the most-used mobile operating system in the world, while Apple's key supplier and rival, Samsung Electronics, has taken the lead in smartphone sales. However, Apple appears to be making headway into the corporate market, a traditional stronghold of now-struggling Research In Motion

Yahoo has instituted a new corporate policy that allows employees to pick from a host of smartphones, including the iPhone 5 and Android-based phones such as Samsung's Galaxy S3. Yahoo, which previously gave out RIM's Blackberry phones, will no longer support them.

AT&T said demand over the weekend had made the iPhone 5 the fastest-selling iPhone the company has ever offered. AT&T did not disclose how many iPhones it had sold, but said the iPhone 5 was still available for preorder and would go on sale September 21 at AT&T retail stores.

All the phones carriers, including Verizon and Sprint Nextel, have said there will be delays of up to three weeks in shipping the phone.

European carriers also reported brisk sales. France Telecom's Orange said bookings for the new phone "have been very strong, breaking the records of what we saw for the iPhone 4 or 4S." But the carrier said it could deliver preorders on time.

It is likely that Apple will have sold more than 30 million iPhones, including older models, by the end of September.