“This piles on to existing anxiety of a slowdown in global growth.” “Apple is used as a proxy to China growth.” US analyst on Apple weakness.
Chip stocks such as Skyworks, Qorvo, Nvidia, Advanced Micro Divices and others all dropped in after hours trading in the US. The Dow Jones Industrial Average futures dropped 338 points after trading started on Wednesday and the S&P 500 dropped 1.3 percent while the Yen saw a massive mover versus the US dollar. Apple reported weaker than expected first-quarter earnings of $84 billion versus a previous guidance that fell in a range of $89 billion and $93 billion. Apple blamed most of the revenue weakness on the poor sales in China – but also added that sales in other countries are “not as strong as we thought they would be.”
“If you look at the results, our shortfall is over 100 percent from iPhone and it is primarily in greater China” according to CEO Tim Cook on CNBC, a news outlet in the US. Analysts have given warnings so this news should not be a total surprise as the trade tensions between the US and China are only getting worse.
The Apple warning does seem to have an effect on other companies that do business in China. Caterpillar shares traded lower by 3 percent in after hours trading. Also Boeing, a US plane manufacturer with facilities in China saw its stock drop 2 percent. Stocks did take a break from their sell-off in December but we at Classiarius are looking for more selling in the Dow and S&P 500 this week and next as the fear of a continued trade war combined with a growing fear of economic weakness continues.