© Reuters. The trader works on the floor of the New York Stock Exchange (NYSE) in New York, New York
By Sruthi Shankar
(Reuters) – Futures on the US stock index fell on Thursday after Apple Inc. (O 🙂 shocked investors with a rare sale warning that it has fueled fears that the US-China trade war and the slowing Chinese economy will eat more in corporate profits than they are expected.
Apple's stock sank 8.2 percent before the bell, after the company downgraded its holiday spending forecast Thursday, amid a slowdown in iPhone sales in China, the first big warning of the season's US earnings around the corner.
"This provides solid evidence of how slower economic growth and trade war make the best cocktail for death for feelings," said Naem Aslam, chief market analyst at Think Markets UK Ltd in London.
The Apple warning, whose action is a member of all three major Wall Street indices, shook the financial markets, as investors sought security in bonds and less risky assets.
At 07:49 AM ET, Dow e-minis () dropped 324 points, or 1.39 percent. S & P 500 e-minis () dropped 34.25 points or 1.36 percent, while the Nasdaq 100 e-minis () dropped 134 points or 2.1 percent.
Apple's slide is a gloomy bullish bullion on Wall Street, hoping to get a better gift in 2019 after a sales drop in December, which President Donald Trump called the "problem."
Although selloff made cheaper shares, with the S & P 500 valuation now at 14 times the expected earnings 18 times a year earlier, earnings estimates were also drastically reduced.
Analysts, on average, expect companies to increase their earnings per share by nearly 7 percent this year, down from a 10 percent forecast in early October and far below expectations of a 24 percent increase in the EPS by 2018, according to IBES of the Refinitive.
Apple's warning for China has the potential to weigh a lot of different companies, ranging from suppliers to companies that rely on China for much of their sales.
Chipmakers, who regard both Apple and China as their main customers, led the ranks in early trading with markets Intel Corp. (O 🙂 Mikron Technology Inc. (O 🙂 and Nvidia Corp. () falls between 2.3 and 4.6 percent.
Commercial poles Boeing Co (N 🙂 and Caterpillar Inc. (N 🙂 dropped above 2 percent.
The US and China are about a month in a 90-day tariff ceasefire to negotiate an agreement. President Donald Trump said on Wednesday that the talks are "very good" and that the stock market will increase after various trade agreements are settled.
Apple's warning tracks data earlier this week, showing a slowdown in factory activity in China and the eurozone, suggesting that the ongoing trade dispute is taking a toll on global production.
The impact on US activity will be clear later on Thursday. At 10 o'clock in the morning, the Procurement Management Institute is expected to report its index of national factory activity dropped to a reading of 57.9 in December from 59.3 in November.
Prior to that, at 8:15 am ET, the National Employment Report of ADP (NASDAQ 🙂 is expected to show that private salaries have increased by 178,000 jobs in December. The report comes in the wake of a more comprehensive report on unpaid wages on Friday.
Among the actions, Celgene Corp. (O 🙂 jumped 31.9 percent after Bristol-Meyers Squibb Co (H 🙂 offered to buy a drug dealer for about $ 74 billion in a cash and stock deal. Bristol-Myers fell by 13.6 percent.
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