Apple held a special event Monday to announce a new, smaller version of the iPhone, along with other product announcements.

The new iPhone SE is the "new member of the iPhone family." It will have a 4-inch screen, but it will come loaded with the same technology that powers larger iPhone 6 models.

The iPhone SE will look almost exactly the same as the iPhone 5 from 2012, but it will be just as powerful as the iPhone 6S with an A9 64-bit processor. It will be available in four colors, including rose gold. It will also have a 12 megapixel camera, which is a big upgrade to the iPhone 5's 8 megapixel sensor.

Wall Street Is Excited for Small Screen

Apple's stock was showing the positive effects of the smaller iPhone way before the phone was even announced. In the 30 days prior to the announcement, Apple shares have increased 10.3 percent, and on Monday shares were up about 0.75 in anticipation of the announcement.

The stock closed at $105.92 Friday, a 15 percent premium from Apple's lowest price in the past 52 weeks. This turnaround for Apple is the best performance the stock has seen ahead of a new iPhone in years.

Apple Surpasses Google Again

With the rally, Apple once again sees itself ahead of Google's parent company Alphabet as the world's most valuable company at $587 billion. Alphabet's shares have been rising too, but they are currently only valued at $514 billion. Earlier this year, Alphabet surpassed Apple in market value briefly.

The last time the stock responded this well to an announcement was back in 2013, 30 days before the iPhone 5S and 5C were announced, when shares were up 11.4 percent.

In the past, investors have shown that rumors of a new iPhone coming out signal good times to buy shares of Apple. That rumor strategy stopped working for investors with the iPhone 6S, with shares falling 6.2 percent in the 30 days before the phone was announced, but the SE seems to have bucked that trend.

Smaller Hands Need Smaller Screens

There is something about the smaller screen in the iPhone 5SE that is helping Apple's stock. The new iPhone is the first phone since the iPhone 5S and iPhone 5C to have a four-inch screen. When the iPhone 6 was introduced in 2014, the smallest screen available was 4.7 inches.

The iPhone SE is the answer to customers who demand a smaller screen due to their smaller hands or personal preferences. Some of these users are stuck with old iPhones like the iPhone 5. A survey from ad agency AppLovin shows that 37 percent of iPhone owners still have a small-screened phone.

Catching up to the iPhone 6

Having an older phone means less RAM, slower performance, less powerful cameras and more. With the iPhone 5SE, customers with a preference for small screens also get all of the latest technology, allowing them to catch up to iPhone 6 and 6S owners in terms of performance.

Big Screens Are Still Coming

Even though there are many customers who want small screen phones again, the overall smartphone market is shifting toward big screens and even mini-tablet hybrid models. Android smartphones from Samsung have consistently had screens of five inches or larger, like the brand new Galaxy S7, which has a 5.1 inch screen.

The iPhone 7, due out this fall, is expected to follow the trend of big screens.

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