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Apple's Butterfly Effect: The iPad's Gorgeous Retina Display Is Propping Up the Stock Market


Apple hits the $600 mark in pre-market trading as anticipation for the new iPad continues to build.

How long can this run last?
-- Margaret Brennan, on Bloomberg TV this morning

Apple (AAPL) shares hit a new milestone in early trading this morning, kissing the $600.09 mark at 9:29 a.m., confounding the same bears that aggressively called the top at $500 back in mid-February.

So what's driving Apple this week?

Simple -- anticipation for the new iPad, which goes on sale Friday.

All indications, including the fact that Apple is reporting a two- to three-week wait time on its website for all versions of the iPad, point to a smash opening for the latest version of the only tablet that matters. (See Why the Google Android Tablet Market is Far Weaker Than It Seems.)

Just last night, iPad reviews started streaming in, with one universal theme -- the screen is drop-dead gorgeous and a major selling point.

Here are some excerpts from reviews out of the major media outlets: (emphasis mine)
  • Joshua Topolsky (The Verge): "Yes, this display is outrageous. It's stunning. It's incredible. I'm not being hyperbolic or exaggerative when I say it is easily the most beautiful computer display I have ever looked at. Perhaps it has something to do with the fact that you hold this in your hands, or maybe it's the technology that Apple is utilizing, or maybe it's the responsiveness of iOS - but there's something almost bizarre about how good this screen is. After the launch event, I described the screen as 'surreal,' and I still think that's a pretty good fit."
  • Walt Mossberg (AllThingsD): "It has the most spectacular display I have ever seen in a mobile device. The company squeezed four times the pixels into the same physical space as on the iPad 2 and claims the new iPad's screen has a million more pixels than an HDTV. All I know is that text is much sharper, and photos look richer."
  • David Pogue (New York Times): "In principle, that avalanche of pixels (and their increased color saturation) means that photos, videos, maps and text should look jaw-droppingly good - and, in apps that have been rewritten for the new screen, they do. Apple's own apps, like Photos, Maps and iBooks, are just incredibly sharp and clear.
"But apps that haven't been rewritten don't benefit as much. In most apps, text is automatically sharpened, but not in all of them. After enjoying the freakishly sharp text in Mail and Safari, you'll be disappointed in the relatively crude type in, for example, the non-updated Amazon Kindle app."

These reviews indicate that the iPad is set up for good follow-through sales following the initial rush because shoppers are going to be wowed by the quality of the display, which blows away the nice-looking screen on the iPad 2 and of course anything available from Android.

So in essence, the iPad's Retina screen is giving Apple shares -- and the market -- an adrenaline boost.

Remember, the iPad came in exactly as rumored, including the screen resolution. But even the most experienced product reviewers are coming away shocked at just how good that screen looks.

Now we all know that Apple is a huge, huge part of the market.

It is 4.3% of the S&P 500 (^GSPC), and 18.4% of the Nasdaq 100.

Furthermore, it is the most highly valued company out there, sporting a market cap of about $550 billion -- enough to buy 110 billion 5-Dollar Footlongs at Subway.

From a psychological perspective, Apple is widely loved by investors because for years, it's been an obvious go-to winner in a sea of market confusion and uninspiring tech "blue chips."

Furthermore, Apple is vital as a symbol of America's technological dominance, having out-innovated a huge array of foreign competitors like Sony (SNE), Nokia (NOK), and Research In Motion (RIMM).

Remember when Japan dominated the gadget business?

Yeah, those days are long gone, especially with Apple getting ready to enter the television business. (See Apple iTV Really, Really Happening This Time, Says Analyst.)

When I look at Mr. Market, I see that if people feel good about Apple -- as they do this week because of the iPad's crazy new screen -- Apple goes up.

And if Apple goes up, the market goes up.

As ludicrous as it may sound, Apple's decision to stuff that brilliant 2,048 x 1,536 Retina display into the new iPad is actually holding the market up simply because it's holding Apple up!

The knee bone is connected to the thigh bone.

Aside from an unexpected economic shock, a dead Apple is the ultimate downside market catalyst because it would completey break investor confidence -- especially because of the goofy Apple-driven style drift happening in the money-management world.

Yesterday, the Wall Street Journal ran a great article detailing the bizarre range of types of mutual funds owning Apple -- including small-cap funds, dividend funds, and get this -- bond funds.

Therefore, this market can't be broken unless the Apple bubble -- and I don't necessarily mean bubble in a bad way -- is popped.

You want a down market? Well, then somebody's got to walk up to Apple, pull out a machete, and cut its head off.

As it turns out, the new iPad is working pretty well as a shield against that happening.

And despite what the bears would like you to believe, pointing out that Apple has gone up a lot does not a bear argument make.

So let's recap what's going right with Apple:

1. It is completely and utterly dominant in the tablet market.
2. It has crushed the entire smartphone industry, with the exception of Samsung.
3. It is steadily taking market share in what's left of the PC market.
4. it has enough cash to, well, do just about anything.
5. It has a slate of competitors lacking the ability and/or will to produce interesting products.
6. it has captured the general public's imagination like no gadget company in recent history.
7. It is the best reatailer on Earth.
So is this as good as it gets?

The bears are screaming yes, but I seem to remember them carrying on in a bg way back at $500.

And $400, for that matter.

Twitter: @MichaelComeau

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Position in AAPL
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