Caterpillar, Nvidia, Apple’s China Woes Put China Trade Talks In Focus| Investor’s Business Daily

Dow Jones futures fell Monday night, along with S&P 500 futures and Nasdaq futures, after the U.S. indicted Huawei and its CFO just ahead of China trade talks. The stock market rally took a step back Monday after Dow Jones giant Caterpillar (CAT) reported a huge earnings miss and chipmaker Nvidia (NVDA) warned on revenue, both blaming China. The tumbles in Caterpillar stock and Nvidia stock follow China-related concerns from Apple (AAPL), Intel (INTC) and Starbucks (SBUX). All of that highlights the importance of China trade talks starting Wednesday in D.C.




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The Chinese economy is slowing down considerably, and the China trade war isn’t helping. President Donald Trump has said the China trade talks are going well. The stock market rally this year has a lot to do with optimism for a China trade deal. Wall Street has largely discounted reports that suggest snags in China trade talks. If there’s no China trade deal and Trump tariffs expand on March 2, brace for a highly negative impact on the stock market and the Chinese economy, as well as on the U.S. and global economy.

Dow Jones Futures Today

Dow Jones futures fell 0.4% vs. fair value. S&P 500 futures sank 0.4%. Nasdaq 100 futures retreated 0.5%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Stock Market Rally Going Sideways

Monday’s stock market trading continued the recent sideways trend for the major averages after a big rebound since Christmas. The Dow Jones, S&P 500 index and Nasdaq lost ground, but are holding above their 50-day moving averages. The recent stock market pause hasn’t hurt growth stocks and allowed a number of top stocks to set up handles, shaking out weak holders and offering lower buy points. Stocks with newly complete handles include Dow stocks Microsoft (MSFT) and Boeing (BA) as well as software leaders Salesforce.com (CRM) and Adobe (ADBE).

China Trade Talks In D.C.

China’s top trade negotiator, Vice Premier Liu He, will meet with U.S. Trade Representative Robert Lighthizer and various pro- and anti-trade Trump administration officials in Washington, D.C., on Jan. 30-31 for China trade talks. Those two days follow three days of midlevel talks earlier this year. Ultimately, a China trade deal comes down to President Trump. Will he accept a China trade deal in which Beijing agrees to buy a lot more U.S. goods? Or will Trump insist that China change its behavior on intellectual-property theft and forced tech transfers?

China Telecom Giant Huawei Charged

Meanwhile, in separate but not unrelated news, the U.S. filed several criminal charges against Chinese telecom gear giant Huawei for stealing trade secrets and committing bank fraud by violating sanctions against Iran. The U.S. also indicted Huawei CFO Meng Wanzhou and said it will seek her extradition from Canada. China responded that the charges are “unfair and immoral,” but there were no immediate threats of retaliation.

Caterpillar Earnings Miss; Nvidia Warning

Caterpillar earnings rose 18% to $2.55 a share in Q4, but missed views by 43 cents. Looking ahead to 2019, Caterpillar earnings guidance wasn’t good either. Nvidia now says Q4 revenue likely was about $2.2 billion vs. already-weak prior guidance of $2.7 billion. Both blamed China as a major factor for their woes. Caterpillar stock plunged 9% Monday; Nvidia stock tanked 14%.

Apple Earnings Due After China Meltdown

On Jan. 3, Apple stock plunged 10% after the Dow Jones tech giant warned of weak iPhone sales, especially in China. Apple’s strategy of hiking prices sharply in amid fierce competition and stagnating industry smartphone sales backfired spectacularly. Apple earnings are due Tuesday night, with investors focused on Apple earnings and sales guidance and more feedback on China. Apple stock fell 0.9% Monday.

Intel: ‘Softer China Demand’

A Dow Jones stock like Apple and Caterpillar, Intel late Thursday fell short on revenue and guided low. Intel stock tumbled 5.5% on Friday and dipped 0.7% on Monday.

Starbucks China Sales Not So Grande

Starbucks stock jumped 3.6% Friday after the coffee giant reported strong earnings and global same-store sales. The one notable negative was China, where same-store sales rose just 1%. Starbucks, an IBD Leaderboard stock, said it’s still upbeat about China long term, but slower growth and heavier competition are challenges. Starbucks stock dipped 0.3% Monday.

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