Forecast Cuts from Apple, Delta Raise Concerns on Corporate Health
January 03 2019 - 2:42PM
Dow Jones News
By Patrick Thomas
Stocks slumped Thursday as two large U.S. companies slashed
their revenue forecasts, prompting fears from investors that more
companies are seeing signs of a global economic slowdown.
Apple Inc. (AAPL) cut its quarterly revenue forecast for the
first time in more than 15 years as it deals with shrinking demand
in China and fewer owners upgrading their smartphones. Shares in
Apple fell nearly 9%, serving as the biggest decliner on the Dow
Jones Industrial Average in Thursday trading. Delta Air Lines Inc.
(DAL) said the pace of ticket-price increases slowed last month,
prompting a selloff in U.S. airline stocks.
Kevin Hassett, chairman of the White House Council of Economic
Advisers, also warned Thursday that other U.S. firms could join
Apple in seeing weaker sales. The White House expected the economy
to grow 3% this year, Mr. Hassett said in an interview with The
Wall Street Journal. Fed officials projected 2.3% growth when they
met two weeks ago.
"There are signs that the Chinese economy is slowing sharply,"
Mr. Hassett said in the interview. "Multinational firms with
profits in China are probably going to see at least that part of
their profit picture sour a little bit."
Analysts have largely expected U.S. companies to see slower
earnings growth this year. Greg Boutle, U.S. head of equity and
derivative strategy for BNP Paribas, is expecting earnings growth
for S&P 500 companies to slow to 5% from the more than 20%
growth seen in 2018.
The news from Apple and Delta, along with soft guidance form
FedEx Corp. and Micron Technology Inc. at the end of last year, has
fed into negative market expectations, he said.
"When we start to see a trend of more bearish forward-looking
guidance, that is something we would expect investors to start to
extrapolate for the broader market," Mr. Boutle said.
Neil Goddin, manager of the Kames Global Equity fund of Kames
Capital, said further warnings across multiple sectors, especially
from luxury goods and industrials, will likely mean markets will
continue to fall.
Mr. Goddin warns markets could go "a lot lower if we truly are
entering a meaningful slowdown."
--Lorena Ruibal contributed to this article.
Write to Patrick Thomas at patrick.thomas@wsj.com
(END) Dow Jones Newswires
January 03, 2019 14:27 ET (19:27 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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