This week, the renowned group of technology stocks known as the Magnificent Seven has experienced a setback, with four out of the seven entering correction territory. When a stock falls at least 10% from its recent peak, it is considered to be in correction territory.
In a sharp contrast, the corporate-bond market remains positive about all seven companies in the group. Let’s take a look at the members of this esteemed group:
- Facebook parent Meta Platforms Inc. (META)
- Apple Inc. (AAPL)
- Microsoft Corp. (MSFT)
- Nvidia Corp. (NVDA)
- Amazon.com Inc. (AMZN)
- Google parent Alphabet Inc. (GOOGL, GOOG)
- Tesla Inc. (TSLA)
It’s important to note that Tesla does not have any outstanding bonds currently. Though they have issued convertible bonds in the past, those have all been converted into equity.
The Magnificent Seven has been credited with fueling the stock market’s growth during the first half of the year, largely due to their association with the exciting field of artificial intelligence. However, the recent weeks have seen a slowdown in their rally as investors express concerns about potential U.S. interest-rate increases, rising Treasury yields, and apprehensions about China. The filing for U.S. bankruptcy protection by property developer Evergrande on Thursday adds to these worries.
As reported by Emily Bary, Meta joined Apple, Microsoft, and Nvidia in correction territory on Thursday. Meanwhile, Tesla finds itself in a bear market, with its stock down over 20% from its recent peak.
Read: Have AI stocks like Nvidia reached bubble territory? Here’s what history can tell us.
To provide further insight into the situation, BondCliQ Media Services, a data-solutions provider, has prepared a series of charts showcasing the number of bonds issued by each company and how they have been traded as the stocks face a downturn.
Microsoft: A Dominant Player in the Bond Market
The bond market is a crucial aspect of the financial world, and Microsoft has established itself as a major player in this arena. According to its 2023 10-K filing with the Securities and Exchange Commission, the software and cloud giant holds an impressive amount of long-term debt, exceeding $50 billion. This places Microsoft at the forefront of companies in terms of bond ownership, with a particular focus on the 30-year maturity range.
Customer Activity in Microsoft’s Trading Volumes
Analyzing the trading volumes over the past 10 days, it becomes evident that customer activity plays a significant role. The chart showcases the buying and selling trends, with the green representing customer buying and the red indicating customer selling. Dealers are also active participants in these transactions, as represented by the blue portion. Notably, Microsoft has witnessed substantial customer buying from dealers, amounting to almost $1.3 billion during this period. Simultaneously, customer sales to dealers reached $960 million.
Positive Outlook for Net Buying
Examining the net buying among all the players within this space over the last 10 days, it is apparent that every company has experienced an increase. Notably, Microsoft stands out as the leader in net buying. This positive trend emphasizes the confidence and trust investors have placed in this tech giant.
Tightened or Steady Spread Performance
Delving into spread performance over the past 50 days for intermediate-term bonds from all seven major issuers, it is clear that most have tightened or maintained steadiness during this period. This stability underscores the reliability and strength of these bonds as investment options.
Apple Faces Stock Correction Amidst Consumer Caution
On a different note, Apple’s stock recently entered a correction phase after declining by more than 10% from its peak of $196.45 on July 31st. As a company primarily focused on discretionary products, Apple is feeling the impact of consumer caution. With current economic uncertainties, consumers have become more cautious in their spending habits, requiring companies like Apple to adapt accordingly. Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management, highlights the need for consumers to carefully evaluate their expenditure in these times.
Read also: Red flags waving for tech stocks as AI bounce fades, China fears escalate