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The Apple Effect and Nasdaq ETFs


Shares of the company have been falling as of late. But beyond direct Apple investors, those who are heavy in Nasdaq-focused ETFs are also probably starting to worry.

The rise of Apple Inc (NASDAQ:AAPL) has been nothing short of extraordinary over the past few years. The company went from a tiny computer firm to a global behemoth that dominates a variety of hardware and broad consumer electronics markets in a just a few short years.

Now, Apple is the most valuable company in the world, a dividend payer, and is poised to continue its reign over the tablet and phone market in the near future. Thanks to this, the company's stock has been a star performer to say the least, adding over 100% in the past two year period, not too shabby for a mega cap firm.

However, while the company may appear invincible to some, a few cracks in the armor are beginning to appear for the computing giant. Worries are starting to crop up over production issues while some are also worried over the company facing the current competition with some forecasting margin compression in the near term.

Thanks to these worries and a general market pullback as of late, Apple shares have been falling from their all-time high just over $705/share. In fact, Apple share prices are now-at time of writing-in correction territory, down more than 10% from this (so far) lifetime peak.

This short-term trend has been pretty devastating for those investors who were late to the Apple party and it has also started to kindle a mild panic in those who have been perma-bullish on the company in the medium term. Beyond direct Apple investors, those who are heavy in Nasdaq (INDEXNASDAQ:.IXIC) focused ETFs are also probably starting to get worried thanks to this recent trend.

After all, the PowerShares QQQ Trust (NASDAQ:QQQ)-which tracks the Nasdaq-100 Index (INDEXNASDAQ:NDX) -- is one of the most popular ETFs in the world and one that puts a great deal of its assets to work in Apple. The fund has close to $34 billion in AUM and daily volume of roughly 43 million shares a day while Apple makes up roughly 19% of the total assets, making it far and away the top holding in the product.

As a result of this, any movement in Apple seems very likely to drive the return of not only the Nasdaq at large but QQQ as well. Given this, investors in QQQ should also be worried about the performance of Apple going forward.
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No positions in stocks mentioned.
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