Business: Apple sinks 5% as market rout continues.
Markets erase their 2018 gains led by disenchantment with tech industry
The U.S. stock market swooned again Tuesday, adding to a slate of losses as Bay Area stalwarts such as Apple, Tesla and Twitter all were hit by a decline that showed few signs of slowing down before the Thanksgiving Day holiday.
Nowhere was that more evident in the performance of the Dow Jones Industrial Average. The bellwether gauge of the health of U.S.traded stocks fell 551.8 points, or 2.2 percent, to close at 24,465.64, erasing all of the year’s market gains. The Nasdaq Composite Index, which tracks many of Silicon Valley’s tech titans, fell 119.65 points, or 1.7 percent, and barely ended the day in the positive for the year at 6,908.82.
“Many investors are just helplessly watching their red screens and gains for the year dissipate in a matter of days,” said Dan Ives, managing director of equity research at Wedbush Securities.
While the Wall Street selloff was widespread, it was hard not to see who was seen as one of the biggest culprits behind the ongoing stock slide: Apple.
Shares of the world’s most-valuable company fell by almost 5 percent, to finish the day at $176.98 as fears continued to grow about Apple’s sales prospects for the coming year. Ap-
ple recently launched the iPhone XS, which comes with a starting price of $999, and the iPhone XS Max with its $1,099 initial price tag, as well as the comparatively inexpensive iPhone XR, which starts at $749. Apple has been rolling out iPhones with bigger prices in the hopes that revenue from the sales of such phones will help counter flattening demand for actual iPhone units.
That philosophy appeared to be in play when, on Nov. 1, Apple reported fiscal fourth-quarter results that included iPhone revenue of $37.19 billion, a 29 percent gain from the year before, while iPhone sales of 46.89 million units rose just 0.5 percent from the same quarter in 2017. Apple also gave a first-quarter sales outlook that disappointed investors, saying that beginning with its next quarter, it would no longer report unit sales of iPhones, iPads
and Mac computers.
That announcement, coming just as Apple was going into what is always its busiest business period of the year, put investors on edge. Since Apple’s report, its shares have fallen more than 20 percent.
Goldman Sachs did its part to add to the worries about Apple, as the brokerage cut its price target late Monday on the company’s stock to $182 a share from $209 after reports about weaker-than-expected demand for new iPhones, and signs of declining sales for all Apple products in China and other emerging markets.
But Apple wasn’t alone in receiving the ire of investors.
Among other Bay Area notables, Tesla shares fell 1.7 percent, to close at $347.49; Twitter gave up almost 3 percent, to fall to $31.06 a share; Netflix shares pulled back by 1.3 percent to slip to $266.98, and HP fell by almost 4 percent, to close at $22.61 a share.
“The bloom is off the rose when it comes to big
tech, since they failed to regulate themselves and protect their customers personal information,” said Jeffrey Sica, president and chief investment officer of Sica Wealth Management in Morristown, N.J. “They have opened the door to government regulation, which will greatly limit their future growth.”
Sica said he’s not surprised about the late-year stock selloff, as he believes the stock market was overvalued by 20 percent to 30 percent due to unreasonable expectations for the so-called “FAANG” stocks — Facebook, Apple, Amazon, Netflix and Google parent company Alphabet.
“You cant trust a market that’s almost entirely driven by five stocks which have been propelled to astronomical heights by stock buybacks and the fear of missing out,” Sica said. “When a sector is priced to perfection, there is little room for error.”
Adding to the day’s negative was a disappointing earnings report from retail giant Target, which reported quarterly sales and
earnings that fell below Wall Street’s expectations, and disclosed a higherthan-expected level of product inventories ahead of the crucial Christmas and holiday shopping season.
Eric Schiffer, chief executive of Los Angeles-based private investment first Patriarch Organization, also blamed the selloff on investors who haven’t given enough attention to larger economic factors that he thinks will remain at play for months to come.
“The market has not aligned its own perspective with that of an aggressive Fed guarding inflation against a backdrop of siphoned (financial) liquidity,” Schiffer said. “Now contrast this with bigger purchasing because of a hot job arena, a good feeling about the economy, and the potential of infrastructure spending. It’s these two warring underlying forces that will mean far more horrifying volatility and significant value burnt to ashes.”