By Chris Matthews and Mark DeCambre, MarketWatch
Apple outlook stokes fears over slowing Chinese economy
U.S. stock indexes traded sharply lower midday Thursday,
extending declines after a survey of American manufacturers showed
the sector growing at its slowest pace in two years, and following
Apple Inc.'s move to lower its sales forecasts, citing weak demand
from China that underscored broader concerns about the global
economy.
How are the benchmarks performing?
The Dow Jones Industrial Average fell 418 points, or 1.7%, at
22,917, the S&P 500 index shed 31 points, or 1.1%, at 2,481,
while the Nasdaq Composite tumbled 93 points, or 1.4%, at
6,481.
What's driving the market?
Stock markets took a turn for the worse Thursday morning, after
a survey from the Institute for Supply Management showed the U.S.
manufacturing sector growing at the slowest pace in two years,
helping to intensify concerns among investors that the U.S. economy
is slowing along with other large economies in Asia and Europe.
The report came on the heels of Apple (AAPL) slashing its
quarterly revenue forecast for the first time in more than 15 years
Wednesday evening, in a move that the iPhone maker's chief
executive, Tim Cook, said was prompted by signs of weakness in the
world's second-largest economy: China.
First Take:Apple lives up to Wall Street's fears with massive
revenue shortfall
(http://www.marketwatch.com/story/apple-lives-up-to-wall-streets-fears-with-massive-revenue-shortfall-2019-01-02)
The announcement by Apple comes as investors are wrestling with
worries that a protracted tariff dispute between Washington and
Beijing is starting to hurt some of the biggest and most
influential U.S. companies, threatening the growth outlook and a
longstanding bull market that already appears in tatters.
The ISM data and Apple's announcement follows fresh signs of
Chinese economic weakness after Beijing's official read of
manufacturing for December
(http://www.marketwatch.com/story/data-showing-chinese-manufacturing-cooling-put-asia-stock-markets-in-early-hole-for-2019-2019-01-01),
released Wednesday, showed a more severe drop than one issued
earlier, reflecting a fall to the weakest level since February
2016.
Investors also remain focused on the Federal Reserve and its
plans for interest rate policy in 2019, ahead of Friday morning's
employment situation report. The jobs numbers will be a key data
point for Fed officials, as they try to determine whether the U.S.
economy is healthy enough to demand further rate increases this
year, after raising rates four times in 2018.
At its most recent meeting in December, the median forecast by
member's of the central bank's interest-rate setting committee
predicted two more rate increases in 2019, but investors are
placing a more than 71.6% probability that the central bank stays
pat this year, according to CME Group data
(https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html),
while Dallas Fed President Robert Kaplan advocated for a pause
(http://www.marketwatch.com/story/feds-kaplan-calls-for-pause-in-interest-rate-hikes-says-open-to-slowing-balance-sheet-runoff-2019-01-03)
in interest-rate increases during a Thursday-morning interview on
Bloomberg Television.
What data are in focus?
What are analysts saying?
The ISM Manufacturing survey data "are clearly showing the
hesitancy of businesses to spend and invest given the macro
headwinds facing the economy, with the biggest issue being trade,"
Yousef Abbasi, global market strategist with INTL FCStone told
MarketWatch.
"We ended 2018 with worries about growth and earnings, and in
the first two days of 2019 we've received more bad Chinese data and
an AAPL revenue guidance cut," Tom Essaye, president of the Sevens
Report, wrote in a Thursday-morning note to clients.
"Neither of those events should be material surprises (China's
been weak for a while and analysts have been cutting estimates on
AAPL for months), but if we're going to sustain a rally this market
needs actual good news, and there hasn't been much lately," he
added.
Which stocks are in focus?
Apple's shares are down 9.2% early Thursday, weighing heavily on
both the price-weighted Dow and the market-cap weighted S&P
500.
Bristol-Myers Squibb Co. (BMY) stock is down 12.2%, after the
firm announced a $74 billion cash-and-stock acquisition of Celgene
Corp. (CELG) Thursday morning. Celgene shares are up more than
28%.
Shares of Delta Air Lines Inc. (DAL) are down 8.3% Thursday,
after the company said
(http://www.marketwatch.com/story/deltas-revenue-outlook-weighs-on-airline-sector-2019-01-03)
that revenue in December was lower than expected. The news helped
drag down the stocks of rivals such as American Airlines Group Inc.
(AAL), Southwest Airlines Co. (LUV), and United Continental
Holdings Inc (UAL).
How did markets trade Wednesday?
On Wednesday, the Dow rose 18.78 points to finish at 23,346.24,
while the S&P 500 index climbed 3.18 points, or 0.1%, to
2,510.03. The Nasdaq rose 30.55 points, or 0.5%, to close at
6,665.94.
How are other markets trading?
Asian markets closed broadly lower, with Hong Kong's Hang Seng
Index , China's Shanghai Composite Index and South Korea's Kospi
losing ground. Japan's markets were closed.
In Europe, stocks are trading broadly lower, with the Stoxx
Europe 600 and the FTSE 100 both in the red.
Crude-oil futures were trading flat after climbing to a two week
high
(http://www.marketwatch.com/story/oil-prices-pull-back-to-kick-off-trading-in-the-new-year-2019-01-02)
on Wednesday. The U.S. dollar edged lower, while gold prices
advanced.
(END) Dow Jones Newswires
January 03, 2019 11:56 ET (16:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Jun 2024 to Jul 2024
FTSE 100
Index Chart
From Jul 2023 to Jul 2024