Apple stock has biggest drop in four years. But why?

You know things have gotten bad for Apple Inc.’s battered stock price when analysts start pointing to something called a “death cross” as the best hope for salvation.

Before I explain just what the morbid-sounding term means, let’s review the carnage from Wednesday’s trading. Apple’s shares fell 6.4% on Wednesday, tumbling $37.05 to close at $538.79. On a percentage basis, that’s the largest one-day drop in four years.

If you’re keeping score at home, Apple just lost $34.9 billion in market cap. In one day. In case that didn’t make your jaw hit the floor, consider this: Apple lost more market cap Wednesday than either Hewlett-Packard Co. or Dell Inc. are worth.

The good news, such as it is, is that Apple is still up nicely from the $411.13 price where it started the year. For any other company, that would be just swell. Alas, for you glass-half-empty types, Apple is down from its $705.57 peak in September.

The biggest mystery is why? Surveying the lancscape of analysts, there’s plenty of theories but no concrete answers. Analysts have plenty of stories and rumors that they could mix and match in an attempt to explain why investors freaked out Wednesday.

For instance, there was the dubious rumor from one blog that orders for Apple components were down, signaling that Apple sales might fall next quarter.

Then there was an IDC report forecasting that tablet sales would be higher than projected (Apple investors: “Yeah!”) but that Apple’s market share would continue to decline (Apple investors: “Boo!”).

And then there was word that AT&T; Inc. was going to sell about 1 million more smartphones than expected this quarter (“Yeah!”). But then some number crunching by Apple watchers indicated that the larger number might only mean that sales of iPhone 5s would match sales of iPhones 4s last year. (“Meh.”)

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And finally, there was the report that China Mobile had agreed to carry the Nokia Lumia phone (“Gasp!”) but has not yet struck a deal with Apple (“Oh.”)

Or maybe investors were just taking some profits. Or maybe they’re worried about the so-called fiscal cliff.

“I think it’s a bunch of one-off news stories that any investor can take as reasons for either raising fears or causing selling pressure,” said Brian Colello, a research analyst at Morningstar.

Taken together and cast in the worst possible light, none of this seems like enough to explain why investors ran for the hills.

Indeed, Gene Munster, Apple super analyst at Piper Jaffray, insisted that all his sources indicated sales of Apple’s products were still going gangbusters. He even stuck to his target of $900 for Apple’s stock during an appearance on CNBC:

“The demand for iPhone, the demand for Apple products continues to be exceptionally high,” he said on the show. “People want their products, and we think that that’s ultimately going to drive the stock higher.”

Still, Munster hedged a bit, noting that investors still could push the stock down to $500 or lower.

Like Munster, Colello wasn’t ready to change his overall view of Apple. He noted that on a historic bases, Apple’s price-to-earnings ratio is a bargain at 12.2 times earnings. And on a macro scale, the technological winds are still at Apple’s back.

“The bigger trend that seems unstoppable right now is the shift from flip phones to smartphones,” Colello said.

Of course, if investors aren’t swayed by the boatloads of products Apple keeps selling, then analysts are crossing their fingers that a technical milestone known as the “death cross” will eventually signal the end of the bleeding.

As explained by MarketWatch, the death cross refers to “when a stock’s 50-day moving average falls below its 200-day moving average.” That should be bad, right?

But hold on: Several analysts noted that Apple hit the death cross five times since November 2000. And what typically happens is that the stock wobbles for a bit, and then takes off again after a few months.

We’ll see if that’s the case again. But in the meantime, it seems the gyrations of Apple’s stock will continue to test the strongest of investors’ stomachs.

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Follow me on Twitter @obrien.