Posted on 01/03/2019 2:38:21 PM PST by Red Badger
U.S. stocks fell sharply on Thursday following a dire quarterly warning from Apple. The iPhone maker blamed a slowing Chinese economy for the shortfall, intensifying fears that the global economy may be slowing down because of the ongoing trade war.
A weaker-than-expected reading on U.S. manufacturing added to those fears.
The Dow Jones Industrial Average dropped 660.02 points, or 2.8 percent, to 22,686.22 as Apple shares led the decline. The 30-stock index tumbled to its low of the day right before the close, trading down as much as 707.83 points.
The S&P 500 pulled back 2.47 percent to 2,447.89 as the tech sector fell 5.07 percent. The Nasdaq Composite tumbled 3 percent to 6,463.50, snapping a five-day winning streak, as Apple’s stock dropped nearly 10 percent. Thursday marked Apple’s worst session since 2013.
Apple said it sees first-quarter revenue of $84 billion vs. a previous guidance of a range of $89 billion and $93 billion. Analysts expected revenue of $91.3 billion for the period, according to the consensus estimate from FactSet. Apple blamed most of the revenue shortfall for struggling business in China.
“This piles on to existing anxiety of a slowdown in global growth,” said Jeff Kilburg, CEO of KKM Financial. “Apple can be used as a proxy to China’s growth.”
Chip stocks Advanced Micro Devices, Nvidia, Skyworks and Qorvo all dropped on the Apple warning. Skyworks lost more than 10 percent. Semiconductors fell broadly with the VanEck Vectors Semiconductor ETF (SMH) dropping 6 percent.
“While it’s likely a combination of both macro and micro, the contribution of the former means that maneuvering through the upcoming earnings season will be like swimming in shark infested waters,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, about what prompted Apple’s guidance cut. “That said, I’d argue it’s more of the latter.”
Apple’s warning also dragged down other companies that do big business in China. Caterpillar shares were down 3.9 percent. Boeing shares dropped 4 percent.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple CEO Tim Cook wrote in a letter to investors on the warning. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed.”
China and the U.S. are currently trying to strike a deal on trade after slapping tariffs on billions of dollars worth of each other’s goods. President Donald Trump said on Wednesday that last month’s losses — which market the worst December decline since 1931 — were a “glitch, ” adding equities will rebound once trade matters are squared up.
Thursday’s decline in equities was accelerated by a weaker-than-expected reading on the U.S. manufacturing sector. ISM’s manufacturing index fell to 54.1 in December, economists polled by Refinitiv expected 57.9.
“We turned the calendar but we didn’t turn the trend in the markets,” said Eric Wiegand, senior portfolio manager at U.S. Bank Private Wealth Management. “We have continued to witness a deceleration in global growth. As we started this year, the purchasing manufacturers’ index data from around the world indicated perhaps a pace of softening that caught investors by surprise. That’s reinforced by today’s release of the ISM manufacturing numbers.”
Shares of Delta Air Lines fell nearly 9 percent after the company issued slightly lower revenue guidance for the fourth quarter. Delta’s downturn dragged American Airlines and United Continental, as they pulled back 7.5 percent and 5 percent, respectively.
—CNBC’s Eustance Huang contributed to this report.
A fine prediction - sometimes business cycles because expectations get ahead of reality. I recall some clymer here years ago calling people ‘negative nay boobs’ for doubting that housing prices continually go up.
Actually, it looks like the tech stock rally, like the dot com rally previously, is being exposed for what it is - a temporary trend.
The tech sector is committing suicide by putting politics before fairness and before business sense. If tomorrow a competitor to Apple, or to Facebook, or to Google were to emerge, and made it clear to the American public that they were committed to maintaining peoples privacy, personal rights, and to avoiding politics-based censorship in any form, that competitor would begin a path to commercial success and dominance and to the destruction of the aforementioned.
While Trump will get blamed for this ‘slow down’ by the lame stream media, it doesn’t take a rocket scientist to see the direct connection to the dhimmicrap ‘success’ in the midterms.
The loss of the House to the communists has brought more ‘uncertainty’ to financial markets than anything DJT has done.
Just sayin’...
Until the NSA showed up on their doorstep the next day and said, "We need you to serve your country."
Gotta ask. Have we hit tech saturation yet? Pretty soon the next big Apple thing gets tiring.
Old school here. If it ain’t broke yada yada yada
—
Probably some of that with smart phones. Each new version is now an incremental improvement, but really not wildly different from a smart phone of 1, 2, or even 5 years ago.
Shhhhh! Don’t go spreading facts around here. Now back to GLOOM AND DOOM!!!
The proper response to that is “we are, now it’s your turn to do the same.”
Exactly.
>>>Is there such a thing as an index fund that includes only companies that do business strictly within the US
A mid cap index would likely be more focused on the domestic market, as opposed to the S&P 500 where 43.6% of revenue came from foreign countries.
Then there’s Maxine who’s head of House Financial Services Committee.
Vanguard used to have one. I would check them out first.
The Deep State is why even though our economy is booming, the stock market is losing ground.
Absolutely. That’s trouble right there.
Apple’s problems are mostly of its own making.
They are facing the “tyranny of size” problem - growth forever is simply not possible. From here on out it’s going to be hang on to market share and don’t let profit margins erode. They don’t know how to do this.
The bigger, longer term problem is that their stuff is not significantly better than anyone else’s (in areas like their desktops, their products can actually be MUCH worse, Google “Apple Laptop Keyboards”), and they are much more expensive. People are catching on to this. The young, the source of their fanboi base, is simply is not willing to upgrade (i.e., toss) what they own every few years anymore. I was on a tech website today frequented by Millennial geeks, and I assure you that the tone was very nasty.
Apple’s hardware products are nearly unrepairable, by design and mostly assembled with glue and tape. Compare that to a Dell, which has incredible support from Dell and third parties. If you as a technician can’t take apart and repair a Dell product, you should not be allowed to handle small (or possibly any) tools. This is one of the reasons that you won’t see a business own Apple products unless their is absolutely no alternative. With Adobe Suite running on Windows, the number of “must have” Apple-only apps is small and getting smaller.
The only things that keep my interest are:
1. SOME of their software is very good. I had an upset on my phone where I lost everything. Two hours later I was back to where I had been a few days earlier (when I did a sync with my desktop) via a restoration that was as easy to execute as a fart. I didn’t even know that my phone was being backed up in the first place!
My wife lost her hard disk drive a few years ago (in an iMac) and same deal. She was running 30 minutes later off of her backup directly, no restoration needed. Apple fixed the machine in a few days and restoration back to where she was before involved clicking “Yes”.
Microsoft can only imagine, in their dreams, of anything that sophisticated and they have had 30+ years to do it.
2. Apple’s “stores” are very good AND they are essentially curated. Apple examines (pretty thoroughly) all apps in their store and extremely few apps that do bad things or take unneeded data get through. I would actually look at an Android phone but I would NOT DARE use anything from their store and I trust Apple a hell of a lot more than I trust Google.
I’m willing to pay a certain amount of “Apple tax” to keep safe, but that tax is getting very, very high and I’m not getting enough for it.
Deserves repeating in bold: "While Trump will get blamed for this ‘slow down’ by the lame stream media, it doesn’t take a rocket scientist to see the direct connection to the dhimmicrap ‘success’ in the midterms.
"The loss of the House to the communists has brought more ‘uncertainty’ to financial markets than anything DJT has done."
The world is in for a really tough two years, until we rid WDC of the DemonRAT vermin!
Sorry just ain’t gonna use a cell phone as a computer. Just ain’t gonna pay 1,000 a year just to make phone calls and use a few apps on a smart phone.
Man, I wish the rally would have waited till New Years - sometimes perception is important.
Well, my play money is gone.
Everything I have in is locked in, so I will see this out one or the other.
I know there are others out there in the same boat.
Just remember..
Storms never last.
“an index fund that includes only companies that do business strictly within the US — i.e. that are less dependent on foreign sales and foreign markets?”
Maybe 60 years ago.
The stock market may be being manipulated, and may be fear sell offs, especially when one company causes the dow and nasdaq to drop.
“If tomorrow a competitor to Apple, or to Facebook, or to Google were to emerge,”
Magical Thinking.
The politics relevant to Apple stock right now is international trade.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.