Thursday January 3rd

3-01-2019

Dow futures point to a decline of more than 250 points at the open after Apple slashes guidance

It’s going to be a tough day for technology stocks on Thursday after Apple warned first-quarter sales would be less than it previously expected. The broader stock market will suffer too as the iPhone maker blamed a slowing Chinese economy for the shortfall. Dow Jones Industrial Average futures pointed to a decline of 267 points at the index’s Thursday open, as of 8:29 a.m. ET Thursday. Meanwhile, S&P 500 futures were off by about 1 percent. Nasdaq-100 futures lost 1.6 percent. Apple’s stock was down 7.9 percent in premarket trading. The Invesco QQQ Trust, which tracks the tech heavy Nasdaq-100 Index, lost more than 1.5 percent in premarket trading. 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. But the company also said that upgrades by customers in other countries were “not as strong as we thought they would be.” Chip stocks Advanced Micro Devices, Nvidia, Skyworks and Qorvo all dropped in premarket trading on the Apple warning. Skyworks lost more than 4 percent. “If you look at our results, our shortfall is over 100 percent from iPhone and it’s primarily in greater China,” Apple CEO Tim Cook told CNBC’s Josh Lipton in an interview Wednesday. “It’s clear that the economy began to slow there in the second half and I believe the trade tensions between the United States and China put additional pressure on their economy.” This shouldn’t be a total surprise for investors, who punished tech stocks in the fourth quarter on fears that Apple’s business was struggling, especially in China. A number of analysts had come out and cut their estimates and price target on Apple last quarter. Apple dropped 30 percent in the final three months of 2018. The technology portion of the S&P 500 lost more than 17 percent. Apple’s warning seemed to be having an effect on any company that does big business in China. Caterpillar shares were down more than 2 percent in premarket trading. Boeing shares dropped 1.4 percent. “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” 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.” Stocks were little changed during their first day of 2019 on Wednesday. This follows a year when the S&P 500 and Dow Jones Industrial Average were down 6.2 percent and 5.6 percent, respectively, in their worst performance in a decade. The S&P 500 and Dow Jones Industrial Average were down 6.2 percent and 5.6 percent, respectively, for 2018. “This piles on to existing anxiety of a slowdown in global growth,” said Jeff Kilburg of KKM Financial. “Apple can be used as a proxy to China’s growth.” Major stocks indexes in Asia were mostly lower on Thursday as U.S. futures pointed to another volatile session for Wall Street after Apple lowered guidance for first quarter and warned of weaker sales in China. South Korea’s Kospi fell 0.81 percent to finish its trading day at 1,993.70. Over in the Greater China region, the Hang Seng index gave up earlier gains to slip 0.22 percent, as of its final hour of trade. The mainland Chinese markets, watched in relation to Beijing’s ongoing tariff fight with Washington, reversed its earlier gains. The Shanghai composite closed largely flat at about 2,464.36 while the tech-heavy Shenzhen composite fell 0.798 percent to finish its trading day at around 1,246.37. The Shenzhen component lost 0.837 percent to close at about 7,089.44. Japan’s stock markets were closed for a holiday on Thursday.  Oil prices were higher on Thursday, rising towards two-week highs struck in the previous session after dipping overnight amid volatile currency and stock markets. Concerns that an economic slowdown in 2019 will cut into fuel demand just as crude supplies are surging also weighed on prices in overnight trading. U.S. West Texas Intermediate crude oil futures rose 72 cents, or 1.6 percent, to $47.26 a barrel by 8:53 a.m. ET (1353 GMT). WTI topped out at $47.78 on Wednesday. Brent crude futures were up $1.01, or 1.8 percent, at $55.92 a barrel. The international benchmark rose as high as $56.56 on Wednesday. Gold prices scaled a more than six-month peak on Thursday as fears of a global economic slowdown embellished safe-haven demand for bullion, with a weaker dollar adding further support. Spot gold was up 0.18 percent at $1,287.03 an ounce at 8:24 a.m. ET, having touched its highest since June 15 at $1,292.32. U.S. gold futures traded up 0.37 percent at $1,288.90.