U.S. stocks were poised for a sharp fall on Tuesday, November 20, 2018, after disappointing holiday-quarter outlooks from major retailers added to a selloff already driven by concern over Apple’s iPhone demand.
Pre-market trading showed Apple Inc under fresh pressure, with the stock on track to open at its weakest level since May. If the decline held, the company would have lost more than 20 percent of its value, or about $250 billion, from its record close on Oct. 3.
Goldman Sachs cut its Apple price target for a second time in a little over a week, saying the pricing and feature mix of the iPhone XR may have landed poorly with buyers outside the United States.
Retail names were also hit hard. Target Corp fell 11.1 percent after reporting third-quarter profit below expectations, while analysts pointed to Best Buy’s results as another sign of weak demand for consumer electronics. Kohl’s Corp dropped 12.4 percent after its full-year profit forecast missed estimates. Lowe’s Companies Inc slid 7.3 percent after announcing more restructuring plans alongside worse-than-expected comparable sales.
At 8:50 a.m. ET, Dow e-minis were down 363 points, or 1.45 percent. S&P 500 e-minis fell 39.5 points, or 1.46 percent, while Nasdaq 100 e-minis dropped 152.75 points, or 2.29 percent.
Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee, said the market move was being driven by broader growth concerns rather than one company alone. “It’s a growth related selloff. It’s not a specific name. People think growth has peaked and earnings have peaked,” he said. “Some of the big retailers are now cracking and that’s just adding fuel to the fire.”
The weakness was not limited to Apple. Facebook Inc, Amazon.com Inc, Netflix Inc and Alphabet Inc were each down between 1.5 percent and 2.01 percent, leaving the so-called FANG group close to the 20 percent decline that would place them in bear market territory.
Chipmakers also came under pressure. Advanced Micro Devices Inc and Micron Technology Inc both lost more than 3 percent, while Nvidia Corp fell 6.3 percent and Intel Corp dropped 8.7 percent.
Investors were also watching trade tensions and the broader global backdrop. Signs of slowing demand for Apple’s flagship phones were seen as having wider implications for technology and internet stocks at a time when markets were already worried about peaking earnings growth, higher borrowing costs and a global economy weighed down by trade disputes.
Separately, a top Chinese diplomat said the failure of a major Asia-Pacific summit to agree on a communique was due to some countries “excusing” protectionism, a remark widely read as a criticism of Washington ahead of the G20 meeting.
Christophe Barraud, chief economist at Market Securities, said recent trading had been shaped by companies and investors moving ahead of tariff deadlines. “The fact is that a lot of trades seen recently resulted from frontloading ahead of the implementation of tariffs,” he said. “For me the biggest risk is the trade war.”
Reporting by Medha Singh, additional reporting by Parikshit Mishra in Bengaluru; Editing by Anil D'Silva.
