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The

S&P 500
looks like it can fall into bear market territory. There is a good chance that won’t happen, though, thanks to

Apple
.
 

There are no shortage of fear factors that could put the index into such scary territory. It starts with the Federal Reserve, which is trying to reign in high inflation by hiking short-term interest rates and reducing its bondholdings, moves that will likely slow down economic and earnings growth. Plus, there are lockdowns in China. Limited supplies from the region results in higher costs for companies, yet another earnings-related concern. 

Its drop-off since March 29 puts in on pace to fall below that 3,836 level, wrote Frank Cappelleri, chief market technician at Instinet. That is especially possible because the index has fallen below levels where it has recently enjoyed support—or buyers. The index hasn’t been this low since early April 2021. 

But such a decline could be averted if Apple (ticker: AAPL) stock continues to do what it has recently done: hold up better than the broader market. Apple has outperformed the S&P 500 for the entire year. At just over $152 a share, Apple stock is still trading just above the $150 area at which buyers have consistently stepped in to send the stock higher several times in the past year-plus. 

If Apple shares indeed stop declining, that would put a noticeable limit on the S&P 500’s potential drop. 

Here’s how it all breaks down. Apple’s market capitalization is just over 7% of the S&P 500’s aggregate market cap—and the index’s level is weighted by market cap. So stocks with larger market values have an outsize influence on the index’s movements.

That means that if Apple stock stands its ground above $150, the S&P 500 has a chance to remain above bear market territory, as the other 93% of the index’s market value would have to drop more than 5% to bring the entire index down to 3,836. “If AAPL does eventually get caught up in a massive U.S./global equity downdraft, that will be one sign we are at truly investible lows,” wrote Nicholas Colas, co-founder of DataTrek. 

That decline doesn’t look like a sure bet currently. Apple has yet to fall below the key $150 level—and there is good reason for that. The stock is seen as one of the highest quality names in the market. Its stable earnings growth and war chest of cash keeps investors in the stock. “I would not short Apple,” said Matthew Tuttle, chief investment officer of Tuttle Capital Management. And right now, “in the $150 area, there is not a lot of downside and that would end up being some pretty significant support,” said Tuttle. 

If the $150 doesn’t hold, look out below. At that point, it’s anybody’s guess how low the stock could go. Just imagine the damage to the S&P 500 if Apple goes into free fall mode. 

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com