John Melloy,Eustance Huang
Dow Jones Industrial Average futures pointed to a decline of 367 points at the index’s Thursday open, as of 6:28 a.m. ET Thursday. Meanwhile, S&P 500 futures were off by more than 1.6 percent. Nasdaq-100 futures lost 2.67 percent. Apple’s stock was down more than 8 percent in premarket trading. The Invesco QQQ Trust, which tracks the tech heavy Nasdaq-100 Index, lost more than 2 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 5 percent.
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.
“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.
They’ll continue their slide on Thursday.
“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.”