Apple Pay Scandal Overshadowed By Dow Jones Entry

Apple Inc. AAPL made headlines several times over the last 24 hours, thanks to a possible release date for Apple's streaming music service and a report stating that Apple Watch app usage will be limited to 10 seconds. There is also hope that Apple Watch will boost the wearables space. One of the bigger stories involves Apple Pay. According to The Wall Street Journal, Apple's mobile payment platform has been "hit by a wave of fraudulent transactions using credit-card data stolen in recent breaches of big retailers," including Target Corporation TGT and Home Depot Inc HD. Argus Research analyst James Kelleher told Benzinga that all of those stories will be overshadowed by the announcement that Apple will replace AT&T Inc. T in the Dow Jones Industrial Average. "The thing about investors is, what they pay attention to is the movement in the stock," said Kelleher. "You always find that legal events, lawsuits, little market share events, are much less material than big stock market drivers. One stock market driver will always be an earnings report, but the big one this morning is Apple going into the Dow Jones investor average." With regard to credit card fraud, Kelleher said that some individuals are creating iPhone accounts under fake names before inputting stolen credit card data. "I don't know how to treat that fraud, but something will be done eventually," he said. "But the point is, right now [Apple] is up because…it's going into the Dow investor average. And that's more of a trading event, it's more of an investing event." At the time of this interview, Apple was up more than one percent. The stock has since fallen and is down more than one percent.

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Small Potatoes

The other stories might gather a lot of attention on Reuters, Bloomberg, TechCrunch and The Wall Street Journal, but Kelleher referred to them as "small time" events. "In terms of the Apple Watch thing, any sort of novel approach -- to treat this watch like a watch, as opposed to treating it like a computer that you've strapped to your wrist -- is probably, actually, long-term beneficial," Kelleher added. "I would think that's kind of a neutral event. But obviously the big driver this morning is not the fraudulence in Apple Pay. It's Apple replacing AT&T in the Dow." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.