Markets tumbled as investors reacted negatively to news of Apple’s lower sales forecast. It seems slowing global economic growth rates are adding to the pile of uncertainty. At the close the Dow was down 660 on heavy volume to close at 22.686. BTS indicators are back in cash. In talking to BTS, they, like other big investors seem to be wrestling with the lack of a discernable market trend meaning that they prefer cash until clarity returns. Some leading indicators are flashing cautionary signs, but it is not known if these are, or are not, short term blips. December unemployment figures come out tomorrow and 1st quarter corporate earnings reports begin trickling in next week. The current consensus for earnings growth call for a 12.4% increase in earnings. While this is good it is also lower that the 16% growth rate that was forecast 6 months ago so gurus are reigning in expectations. Utility stocks continue to hold value as a defensive haven.
The slowdown in China is influencing certain US companies like Apple. Yesterday Apple CEO Tim cook, in a letter to shareholders, reduced prior Q1 earnings projections from $89-92 billion to $84 billion. According to Cook, the shortfall is entirely due to slowing iPhone sales in greater China.
Biotech stocks were higher after Bristol-Myers Squibb (sounds like a law firm) agreed to purchase Celgene in a $74 billion deal aimed at gaining a competitive advantage in the cancer treatment market. The size of the deal makes this the biggest healthcare merger ever. Shares of other biotech’s were up on the news with Gilead Sciences gaining almost 3%.
US manufacturing growth rates slowed in December. The ISM Manufacturing index fell more than expected with a reading of 54.1. A reading below 50 marks correction so the current reading still shows growth but at a lower rate than record levels seen in 2018. Survey respondents cited uncertainty about future growth and tariffs as the reason behind the lower growth expectations. The Dallas Fed also reported that oil and gas business activity was flat in the 4th quarter after 10 straight quarters of growth. Oil executives cited falling oil prices but expect WTI crude to trade higher in 2019 to just under $60 per barrel.