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The Dollar Goes Nowhere Quickly

Overview: The dollar continues to consolidate
broadly after the dramatic price swings at the end of last week. For the most
part, the greenback remains…



Overview: The dollar continues to consolidate broadly after the dramatic price swings at the end of last week. For the most part, the greenback remains inside yesterday's ranges, which were inside last Friday's. The G10 currencies are a little heavier today, except the Japanese yen and Norwegian krone, which are posting small gains. Indeed, the greenback is near session highs against most of the major currencies as we go to print. Emerging market currencies are more mixed. Central European currencies and the Philippine peso are modestly lower, while the South African rand and Mexican peso join the Thai baht and Malaysian ringgit to advance. Gold is recovering from yesterday's slide to about $2017, the lowest level since December 18. It is approaching $2040. 

European benchmark 10-year bond yields are jumping 4-6 bp today, while the 10-year Treasury is up almost one basis point to 4.04%. Asia Pacific equities were mostly higher, including mainland China. However, Chinese shares that trading in Hong Kong, and the Hang Seng itself, South Korea, and Taiwanese shares extended their recent declines. Europe's Stoxx 600 is giving back about a third of yesterday's nearly 0.4% advance, while US index futures are paring yesterday's gains too. February WTI was tagged for 4.1% yesterday, its biggest loss since the middle of last November. It has recouped almost half of the loss today and is back above $72.

Asia Pacific

The continued moderation of Tokyo's CPI bodes well for the national trend and suggest that the pressure on the BOJ to jettison the negative overnight interest rate target has slackened. Tokyo's CPI peaked at 4.4% in January 2023 and finished the year at 2.4%, the lowest since mid-22. The core rate, which excludes fresh food, is at 2.1%, after peaking at 4.3% at the start of last year. The measure that excludes fresh food and energy slipped to 3.5% from 3.6% in November. It peaked at 4% July and August. The national figures are due on January 19, but the Tokyo measure is a good proxy. 

The BOJ meeting concludes on January 23. There had been a small minority of participants who thought a hike was possible then, but after the earthquake, many appear to have joined the majority expect a move in late April. BOJ officials are not convinced yet that demand is strong enough to sustain the increase in price pressures. Wages have not kept pace with inflation and household consumption remains weak. Household spending fell 2.9% year-over-year in November (2.3% expected). In November 2022, they had fallen by 1.2% year-over-year. Household consumption posted one year-over-year gain (last February 1.6%) since October 2022. Labor cash earnings rose 1.5% year-over-year in October and are expected to have remained there in November. Adjusted for inflation, real cash earnings were 2.3% lower year-over-year in October and are expected to be 2% lower than last November with tomorrow's report.

Australia's retail sales bounced back in November (2.0% vs 1.2% median forecast in Bloomberg's survey) after slipping by 0.4% (initially -0.2%) in October. It is the strongest increase since 2021 but may not herald a recovery. In the first 11 months of the 2023, Australian retail sales rose by an average of 0.5%. In the same period in 2022, retail sales rose by an average of 1%. Retail sales were flattered by rising prices. The Australian economy grew by almost 1% in H1 23 but slowed to 0.2% in Q3 and is expected to have matched that in Q4. 

The dollar briefly traded below the pre-weekend low (~JPY143.80) against the Japanese yen in the North American afternoon, reaching almost JPY143.65. and slipped further in early Asia Pacific turnover, reaching nearly JPY143.40. It recovered to JPY144.30 before stalling. Support is seen in the JPY142.10-40 area. The Australian dollar recorded an inside session yesterday but closed firmly. Still, it was the fourth consecutive session of lower highs. Yesterday's high was about $0.6735. and that is where is stalled today. Yesterday's low was slightly below $0.6680 and so far, today's low is about $0.6695. The consolidative phase continues. The greenback also recorded an inside day against the Chinese yuan yesterday and again today. It too is consolidating. The key remains the pre-weekend range (~CNY7.1390-CNY7.1710). The PBOC set the dollar's reference rate at CNY7.1010 (CNY7.1006 yesterday). The average projection in Bloomberg's survey was for CNY7.1490 (CNY7.1498 yesterday).


"Immaculate deflation" that has become the market's shorthand for talking about the rise in interest rates and the easing of price pressures without a much impact on unemployment. However, this is not another expression of "American exceptionalism."  Eurozone unemployment was 7.5% before Covid struck. It peaked at 8.6% in August/September 2020. It bounced around 6.5%-6.6% most of 2023. The unemployment rate has been at 6.5% since last August and recorded a new low of 6.4% in December. Separately, German reported disappointing 0.7% drop in industrial output in November. The median forecast in Bloomberg's survey was for a 0.3% increase. Germany's industrial output has not risen since last April. The aggregate report for the eurozone is due next week (January 15). Lastly, the France reported a narrower trade deficit in November (~5.9 bln euros vs 8.5 bln euros in October). However, the takeaway is that the French trade deficit is narrower in 2023. Through November, the French trade deficit in 2023 was almost 96 bln euros. The shortfall in 2022 was slightly more than 164 bln euros, which was nearly twice the 2021 deficit. France's trade deficit in 2019, before the pandemic was almost 58 bln euros. 

The euro traded in about a quarter-cent range around $1.0950. The market lacks near-term conviction, and the consolidative phase is continuing. A move above $1.10, last Friday's high, could be seen as a breakout and spur a quick move higher. On the downside, last Friday's low was slightly below $1.0880, and yesterday's low was near $1.0925. Sterling was confined to the upper end of last Friday's range but settled at its highest level (~$1.2255) since December 27. More formidable resistance is seen around $1.28, which sterling has not closed above since the end of last July. It looks to have found support in the European morning near $1.2720 and looks set to push higher and retest the upper end of its recent range in North America today.


The foreign exchange market used to be sensitive to the monthly US trade figures. But this is not the case anymore. With the advanced goods report, the trade balance has been easier to forecast. Perhaps, in the larger picture, the many participants recognize that importance of capital flows in determining exchange rates. Though there are different ways to measure capital flows, they are much larger than trade flows. The US reports the November trade balance today. The goods balance deteriorated in each of the three months through November, but despite the over-valued dollar and the growth differentials, the nominal goods balance was little changed in the first 11 months of 2023 (~985 bln) from the same period in 2022 (~$971 bln). The US runs a goods deficit but a persistent service surplus. As a consequence, the overall trade deficit is smaller than the goods shortfall. In the first 10 months of 2023, the overall nominal trade deficit was about $655 bln, down from around $816 bln in the Jan-Oct 2022 period.

Canada reports its November merchandise trade balance. It has experienced a sharp deterioration of its trade goods balance this year and it seems reflect both lower prices and weaker foreign demand. In the first ten months of 2022, Canada recorded a goods trade surplus of about C$19.4 bln. In the Jan-Oct 2023 period the surplus disappeared and a small deficit of around C$1.5 bln has been recorded. Canada's exports contracted by 5.1% at an annualized pace in Q3, which saw the Canadian economy contract by a little more than 1% (annualized) the quarter. Canada reports a monthly GDP figure and that last time it increased was in May. The November GDP is due on January 31.

Mexico will report its December CPI today. Like the US report due Thursday, headline CPI may firm slightly, while the core rate continues to ease. The year-over-year headline rate is seen rising to almost 4.6% from slightly above 4.3%. The core rate may slip toward 5.15% from 5.3%, which would be the slowest pace since September 2021. An increase in the headline rate would be the second consecutive gain. Banxico meets next on Feb 8. It will have the January CPI report in hand when it meets. The swaps market has about an 80% chance of a cut discounted over the next three months. 

The US dollar was turned back after poking briefly above CAD1.3400 yesterday, its highest level since December 18. The greenback reversed low and fell to about CAD1.3345, creating a potential shooting star candlestick. Follow-through selling today has been marginal at best (not even $1.3340). A break below CAD1.3300 is needed to boost confidence a high is in place. The risk is for a re-challenge of CAD1.3400. Follow-through buying of the Mexican peso lifted it to level not seen since last August. The dollar fell to almost MXN16.7850. Before the weekend, it traded above MXN17.07. The greenback's low last year was recorded in late July near MXN17.62. A narrow range has dominated so far today (~MXN16.8165-MXN16.8520).


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Congress’ failure so far to deliver on promise of tens of billions in new research spending threatens America’s long-term economic competitiveness

A deal that avoided a shutdown also slashed spending for the National Science Foundation, putting it billions below a congressional target intended to…



Science is again on the chopping block on Capitol Hill. AP Photo/Sait Serkan Gurbuz

Federal spending on fundamental scientific research is pivotal to America’s long-term economic competitiveness and growth. But less than two years after agreeing the U.S. needed to invest tens of billions of dollars more in basic research than it had been, Congress is already seriously scaling back its plans.

A package of funding bills recently passed by Congress and signed by President Joe Biden on March 9, 2024, cuts the current fiscal year budget for the National Science Foundation, America’s premier basic science research agency, by over 8% relative to last year. That puts the NSF’s current allocation US$6.6 billion below targets Congress set in 2022.

And the president’s budget blueprint for the next fiscal year, released on March 11, doesn’t look much better. Even assuming his request for the NSF is fully funded, it would still, based on my calculations, leave the agency a total of $15 billion behind the plan Congress laid out to help the U.S. keep up with countries such as China that are rapidly increasing their science budgets.

I am a sociologist who studies how research universities contribute to the public good. I’m also the executive director of the Institute for Research on Innovation and Science, a national university consortium whose members share data that helps us understand, explain and work to amplify those benefits.

Our data shows how underfunding basic research, especially in high-priority areas, poses a real threat to the United States’ role as a leader in critical technology areas, forestalls innovation and makes it harder to recruit the skilled workers that high-tech companies need to succeed.

A promised investment

Less than two years ago, in August 2022, university researchers like me had reason to celebrate.

Congress had just passed the bipartisan CHIPS and Science Act. The science part of the law promised one of the biggest federal investments in the National Science Foundation in its 74-year history.

The CHIPS act authorized US$81 billion for the agency, promised to double its budget by 2027 and directed it to “address societal, national, and geostrategic challenges for the benefit of all Americans” by investing in research.

But there was one very big snag. The money still has to be appropriated by Congress every year. Lawmakers haven’t been good at doing that recently. As lawmakers struggle to keep the lights on, fundamental research is quickly becoming a casualty of political dysfunction.

Research’s critical impact

That’s bad because fundamental research matters in more ways than you might expect.

For instance, the basic discoveries that made the COVID-19 vaccine possible stretch back to the early 1960s. Such research investments contribute to the health, wealth and well-being of society, support jobs and regional economies and are vital to the U.S. economy and national security.

Lagging research investment will hurt U.S. leadership in critical technologies such as artificial intelligence, advanced communications, clean energy and biotechnology. Less support means less new research work gets done, fewer new researchers are trained and important new discoveries are made elsewhere.

But disrupting federal research funding also directly affects people’s jobs, lives and the economy.

Businesses nationwide thrive by selling the goods and services – everything from pipettes and biological specimens to notebooks and plane tickets – that are necessary for research. Those vendors include high-tech startups, manufacturers, contractors and even Main Street businesses like your local hardware store. They employ your neighbors and friends and contribute to the economic health of your hometown and the nation.

Nearly a third of the $10 billion in federal research funds that 26 of the universities in our consortium used in 2022 directly supported U.S. employers, including:

  • A Detroit welding shop that sells gases many labs use in experiments funded by the National Institutes of Health, National Science Foundation, Department of Defense and Department of Energy.

  • A Dallas-based construction company that is building an advanced vaccine and drug development facility paid for by the Department of Health and Human Services.

  • More than a dozen Utah businesses, including surveyors, engineers and construction and trucking companies, working on a Department of Energy project to develop breakthroughs in geothermal energy.

When Congress shortchanges basic research, it also damages businesses like these and people you might not usually associate with academic science and engineering. Construction and manufacturing companies earn more than $2 billion each year from federally funded research done by our consortium’s members.

A lag or cut in federal research funding would harm U.S. competitiveness in critical advanced technologies such as artificial intelligence and robotics. Hispanolistic/E+ via Getty Images

Jobs and innovation

Disrupting or decreasing research funding also slows the flow of STEM – science, technology, engineering and math – talent from universities to American businesses. Highly trained people are essential to corporate innovation and to U.S. leadership in key fields, such as AI, where companies depend on hiring to secure research expertise.

In 2022, federal research grants paid wages for about 122,500 people at universities that shared data with my institute. More than half of them were students or trainees. Our data shows that they go on to many types of jobs but are particularly important for leading tech companies such as Google, Amazon, Apple, Facebook and Intel.

That same data lets me estimate that over 300,000 people who worked at U.S. universities in 2022 were paid by federal research funds. Threats to federal research investments put academic jobs at risk. They also hurt private sector innovation because even the most successful companies need to hire people with expert research skills. Most people learn those skills by working on university research projects, and most of those projects are federally funded.

High stakes

If Congress doesn’t move to fund fundamental science research to meet CHIPS and Science Act targets – and make up for the $11.6 billion it’s already behind schedule – the long-term consequences for American competitiveness could be serious.

Over time, companies would see fewer skilled job candidates, and academic and corporate researchers would produce fewer discoveries. Fewer high-tech startups would mean slower economic growth. America would become less competitive in the age of AI. This would turn one of the fears that led lawmakers to pass the CHIPS and Science Act into a reality.

Ultimately, it’s up to lawmakers to decide whether to fulfill their promise to invest more in the research that supports jobs across the economy and in American innovation, competitiveness and economic growth. So far, that promise is looking pretty fragile.

This is an updated version of an article originally published on Jan. 16, 2024.

Jason Owen-Smith receives research support from the National Science Foundation, the National Institutes of Health, the Alfred P. Sloan Foundation and Wellcome Leap.

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What’s Driving Industrial Development in the Southwest U.S.

The post-COVID-19 pandemic pipeline, supply imbalances, investment and construction challenges: these are just a few of the topics address by a powerhouse…



The post-COVID-19 pandemic pipeline, supply imbalances, investment and construction challenges: these are just a few of the topics address by a powerhouse panel of executives in industrial real estate this week at NAIOP’s I.CON West in Long Beach, California. Led by Dawn McCombs, principal and Denver lead industrial specialist for Avison Young, the panel tackled some of the biggest issues facing the sector in the Western U.S. 

Starting with the pandemic in 2020 and continuing through 2022, McCombs said, the industrial sector experienced a huge surge in demand, resulting in historic vacancies, rent growth and record deliveries. Operating fundamentals began to normalize in 2023 and construction starts declined, certainly impacting vacancy and absorption moving forward.  

“Development starts dropped by 65% year-over-year across the U.S. last year. In Q4, we were down 25% from pre-COVID norms,” began Megan Creecy-Herman, president, U.S. West Region, Prologis, noting that all of that is setting us up to see an improvement of fundamentals in the market. “U.S. vacancy ended 2023 at about 5%, which is very healthy.” 

Vacancies are expected to grow in Q1 and Q2, peaking mid-year at around 7%. Creecy-Herman expects to see an increase in absorption as customers begin to have confidence in the economy, and everyone gets some certainty on what the Fed does with interest rates. 

“It’s an interesting dynamic to see such a great increase in rents, which have almost doubled in some markets,” said Reon Roski, CEO, Majestic Realty Co. “It’s healthy to see a slowing down… before [rents] go back up.” 

Pre-pandemic, a lot of markets were used to 4-5% vacancy, said Brooke Birtcher Gustafson, fifth-generation president of Birtcher Development. “Everyone was a little tepid about where things are headed with a mediocre outlook for 2024, but much of this is normalizing in the Southwest markets.”  

McCombs asked the panel where their companies found themselves in the construction pipeline when the Fed raised rates in 2022.   

In Salt Lake City, said Angela Eldredge, chief operations officer at Price Real Estate, there is a typical 12-18-month lead time on construction materials. “As rates started to rise in 2022, lots of permits had already been pulled and construction starts were beginning, so those project deliveries were in fall 2023. [The slowdown] was good for our market because it kept rates high, vacancies lower and helped normalize the market to a healthy pace.” 

A supply imbalance can stress any market, and Gustafson joked that the current imbalance reminded her of a favorite quote from the movie Super Troopers: “Desperation is a stinky cologne.” “We’re all still a little crazed where this imbalance has put us, but for the patient investor and owner, there will be a rebalancing and opportunity for the good quality real estate to pass the sniff test,” she said.  

At Bircher, Gustafson said that mid-pandemic, there were predictions that one billion square feet of new product would be required to meet tenant demand, e-commerce growth and safety stock. That transition opened a great opportunity for investors to run at the goal. “In California, the entitlement process is lengthy, around 24-36 months to get from the start of an acquisition to the completion of a building,” she said. Fast forward to 2023-2024, a lot of what is being delivered in 2024 is the result of that chase.  

“Being an optimistic developer, there is good news. The supply imbalance helped normalize what was an unsustainable surge in rents and land values,” she said. “It allowed corporate heads of real estate to proactively evaluate growth opportunities, opened the door for contrarian investors to land bank as values drop, and provided tenants with options as there is more product. Investment goals and strategies have shifted, and that’s created opportunity for buyers.” 

“Developers only know how to run and develop as much as we can,” said Roski. “There are certain times in cycles that we are forced to slow down, which is a good thing. In the last few years, Majestic has delivered 12-14 million square feet, and this year we are developing 6-8 million square feet. It’s all part of the cycle.”  

Creecy-Herman noted that compared to the other asset classes and opportunities out there, including office and multifamily, industrial remains much more attractive for investment. “That was absolutely one of the things that underpinned the amount of investment we saw in a relatively short time period,” she said.  

Market rent growth across Los Angeles, Inland Empire and Orange County moved up more than 100% in a 24-month period. That created opportunities for landlords to flexible as they’re filling up their buildings. “Normalizing can be uncomfortable especially after that kind of historic high, but at the same time it’s setting us up for strong years ahead,” she said. 

Issues that owners and landlords are facing with not as much movement in the market is driving a change in strategy, noted Gustafson. “Comps are all over the place,” she said. “You have to dive deep into every single deal that is done to understand it and how investment strategies are changing.” 

Tenants experienced a variety of challenges in the pandemic years, from supply chain to labor shortages on the negative side, to increased demand for products on the positive, McCombs noted.  

“Prologis has about 6,700 customers around the world, from small to large, and the universal lesson [from the pandemic] is taking a more conservative posture on inventories,” Creecy-Herman said. “Customers are beefing up inventories, and that conservatism in the supply chain is a lesson learned that’s going to stick with us for a long time.” She noted that the company has plenty of clients who want to take more space but are waiting on more certainty from the broader economy.  

“E-commerce grew by 8% last year, and we think that’s going to accelerate to 10% this year. This is still less than 25% of all retail sales, so the acceleration we’re going to see in e-commerce… is going to drive the business forward for a long time,” she said. 

Roski noted that customers continually re-evaluate their warehouse locations, expanding during the pandemic and now consolidating but staying within one delivery day of vast consumer bases.  

“This is a generational change,” said Creecy-Herman. “Millions of young consumers have one-day delivery as a baseline for their shopping experience. Think of what this means for our business long term to help our customers meet these expectations.” 

McCombs asked the panelists what kind of leasing activity they are experiencing as a return to normalcy is expected in 2024. 

“During the pandemic, shifts in the ports and supply chain created a build up along the Mexican border,” said Roski, noting border towns’ importance to increased manufacturing in Mexico. A shift of populations out of California and into Arizona, Nevada, Texas and Florida have resulted in an expansion of warehouses in those markets. 

Eldridge said that Salt Lake City’s “sweet spot” is 100-200 million square feet, noting that the market is best described as a mid-box distribution hub that is close to California and Midwest markets. “Our location opens up the entire U.S. to our market, and it’s continuing to grow,” she said.   

The recent supply chain and West Coast port clogs prompted significant investment in nearshoring and port improvements. “Ports are always changing,” said Roski, listing a looming strike at East Coast ports, challenges with pirates in the Suez Canal, and water issues in the Panama Canal. “Companies used to fix on one port and that’s where they’d bring in their imports, but now see they need to be [bring product] in a couple of places.” 

“Laredo, [Texas,] is one of the largest ports in the U.S., and there’s no water. It’s trucks coming across the border. Companies have learned to be nimble and not focused on one area,” she said. 

“All of the markets in the southwest are becoming more interconnected and interdependent than they were previously,” Creecy-Herman said. “In Southern California, there are 10 markets within 500 miles with over 25 million consumers who spend, on average, 10% more than typical U.S. consumers.” Combined with the port complex, those fundamentals aren’t changing. Creecy-Herman noted that it’s less of a California exodus than it is a complementary strategy where customers are taking space in other markets as they grow. In the last 10 years, she noted there has been significant maturation of markets such as Las Vegas and Phoenix. As they’ve become more diversified, customers want to have a presence there. 

In the last decade, Gustafson said, the consumer base has shifted. Tenants continue to change strategies to adapt, such as hub-and-spoke approaches.  From an investment perspective, she said that strategies change weekly in response to market dynamics that are unprecedented.  

McCombs said that construction challenges and utility constraints have been compounded by increased demand for water and power. 

“Those are big issues from the beginning when we’re deciding on whether to buy the dirt, and another decision during construction,” Roski said. “In some markets, we order transformers more than a year before they are needed. Otherwise, the time comes [to use them] and we can’t get them. It’s a new dynamic of how leases are structured because it’s something that’s out of our control.” She noted that it’s becoming a bigger issue with electrification of cars, trucks and real estate, and the U.S. power grid is not prepared to handle it.  

Salt Lake City’s land constraints play a role in site selection, said Eldridge. “Land values of areas near water are skyrocketing.” 

The panelists agreed that a favorable outlook is ahead for 2024, and today’s rebalancing will drive a healthy industry in the future as demand and rates return to normalized levels, creating opportunities for investors, developers and tenants.  

This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at or

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Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.



They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

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Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

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