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Apple Warning Slams Apple Stock, Tests Stock Market Rally Investor’s Business Daily

Dow Jones futures fell sharply early Thursday morning, along with S&P 500 futures and Nasdaq futures, after Apple (AAPL) warned on fiscal first-quarter revenue and gross margins, raising doubts about the 2019 stock market rally attempt. Apple stock fell sharply in late trade. So did Apple iPhone suppliers such as Broadcom (AVGO), Qualcomm (QCOM), Analog Devices (ADI) and Taiwan Semiconductor (TSM). Many other big techs, including Microsoft (MSFT) and the FANG internet giants, retreated late, but how will they react in Thursday’s stock market?




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Dow Jones Futures Today

Dow Jones futures fell 1.34% vs. fair value. S&P 500 futures retreated 1.35%. Nasdaq 100 futures plunged 2.2%. Remember that overnight action in Dow futures, Apple stock and elsewhere doesn’t necessarily translate into actual trading in the next regular session.

In Wednesday’s stock market, the Dow Jones and S&P 500 index rose 0.1%, while the Nasdaq composite climbed 0.5%.

Apple Warning: Cook Blames China, iPhone Upgrades

Apple now sees revenue for the fiscal first quarter ended Dec. 29 to be around $84 billion, far below its already disappointing guidance of $89 billion to $93 billion. At $89 billion, that would be a 5% decline vs. a year earlier. Apple also cut its gross margin forecast slightly.

Apple CEO Tim Cook, in a statement, blamed “economic deceleration” in China, currency headwinds and fewer Apple iPhone upgrades than expected. But weak demand for Apple’s flagship, high-margin product and in a massive market is not a good sign.

Apple stock crashed 7.55% to 145.99 in late trading, signaling a test of its Dec. 24 low of 146.59, the worst since July 2017. Shares edged up 0.1% to 157.92 Wednesday Apple stock had crashed following its initial Nov. 1 holiday revenue guidance, then kept falling as several iPhone suppliers warned and numerous analysts saw signs of weakening demand.

Apple was a big driver of the worsening stock market correction in the prior two months, with the Nasdaq and the S&P 500 index both hitting bear market territory and the Dow Jones just avoiding a 20% decline.

Apple Stock Impact — How Broad Will The Selling Be?

Apple stock is part of the Dow Jones, S&P 500 index and Nasdaq composite, so it can have a significant impact on those major stock market averages all by itself. The Apple stock market fallout from Wednesday night’s warning also slammed iPhone suppliers such as Broadcom stock, Qualcomm stock, Taiwan Semiconductor stock, Analog Devices stock, Lumentum (LITE), Qorvo (QRVO), Skyworks (SWKS) and more.

Broadcom fell 5% in late trading. Qualcomm slid 2%, Taiwan Semiconductor 3.5%, Analog Devices 2%, Qorvo 5%, Skyworks 5% and Lumentum 8%.

A big question for the 2019 stock market rally attempt is whether Apple’s warning drags down less-related companies. Microsoft stock, Salesforce.com (CRM), Alibaba (BABA) and Boeing (BA) were all were down somewhat late Wednesday.

Apple Stock Investing Lessons

Sell on technicals: Apple stock bulls could point to eight quarters of accelerating revenue growth, while Apple earnings growth sped up for the last three quarters. Accelerating growth is a great sign. But typically a winning stock will flash technical sell signals before the fundamentals deteriorate.

Don’t buy beaten-down stocks: Apple stock crashed in November and December. At various points, investors could argue that shares were cheap and were sure to rally. But not all stocks bounce back, and even those that do may lag more-promising stocks. Even with its post-Christmas rally, Apple stock didn’t outpace the broader market. Its relative strength line, which compares a stock’s performance with the S&P 500 index, was trading right at eight-month lows.

Don’t buy before a stock market rally is confirmed: The Nasdaq composite rose for a fifth straight session on Wednesday, as the stock market rally attempt continued into 2019. But there has been no follow-through day to confirm the new uptrend. Until a market rally proves itself, it’s still a stock market correction and investors should stay on the sideline. Obviously, if Apple warned after a follow-through day, iPhone suppliers and the stock market likely would take a hit. But there would be more evidence that the uptrend had staying power.

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