Apple’s warning throws Wall Street off balance

Chennai: Apple Inc stunned investors with a sales warning that inflamed fears that the Sino-US trade war and a slowing China economy would eat into corporate profits more than expected.

Apple’s shares sank 8.5 per cent before the opening bell after the company slashed its holiday-quarter revenue forecast on slowing iPhone sales in China, the first major warning with the US earnings season around the corner.

The warning from Apple, whose stock is a member of all the three major Wall Street indexes, rocked financial markets, as investors sought safety in bonds and less risky assets.

According to media reports, Apple’s warning on China has the potential to weigh heavily on a wide variety of companies, ranging from its suppliers to firms that rely on China for a major portion of their sales.

Earlier yesterday, Dow e-minis were down 256 points, or 1.10 per cent. S&P 500 e-minis were down 25.5 points, or 1.02 per cent and Nasdaq 100 e-minis were down 110.5 points, or 1.73 per cent.

Apple’s slide was seen as a gloomy omen for Wall Street bulls hoping for an early gift in 2019 following December’s steep selloff.

Though the selloff has made stocks cheaper, with the S&P 500’s valuation now at 14 times expected earnings from 18 times a year earlier, earnings estimates have also been sharply cut.

Analysts on average expect S&P 500 companies to increase their earnings per share by nearly seven per cent this year, down from a forecast of 10 per cent at the start of October and far below their expectations of 24 per cent EPS growth for 2018, according to Refinitiv’s IBES.

NT Bureau