Closer Eyes Peeled on Wall Street
October marked a very dark month for infamous Wall Street, as New York’s S&P 500 Index had its first financial scare in over seven years. The S&P 500 has been held under close scrutiny as its stocks have failed to stay consistent. Investors are continuing to watch for a market correction rather than guessing at how the market will grow. Though the market has still seen more good days than bad ones, setbacks are ongoing and are predicted to continue.
On Monday November 16th, Dow Jones Industrial dropped more than 600 points, or 2.3% market drop overall, in response to technology and health giants casting anxiety upon its stockholders due to its earning reports. Early Monday on October 10th, technology sectors started their trades of the day. What stockholders had hoped to be an optimistic trading day was anything but a reality as these tech stocks dramatically fell, along with other sectors including oil conglomerates, manufacturers and entertainment firms.
One of the main contributions for the drop in the technology sector has to do with tech giant Apple (AAPL). Apple shares dropped 5% more after one of its suppliers, Lumentum Holdings, cut its earnings and had pessimistic outlooks on Apple’s financial future. This claim not only worried stockholders but consumers as well, raising questions about the change in demand for the new iPhone XR. As a new trading day began Tuesday morning, Apple prices declined further thanks to Qorvo - a radio chip company whom supplies for Apple’s iPhones. Qorvo cut its revenue outlooks as well, bringing down Apple’s projected revenue 8% by mid-December. But what are the reasons for these companies’ negative revenue outlooks? Well, iPhones latest iPhone XR was supposed to be the largest seller of the iPhones overall, though it seriously failed to do so. In fact, Apple themselves have recently reached out to Asian manufacturers and passed along their wishes of not expanding production of the device. But the effects of Wall Street’s upset don’t just stop there. As Apple’s investor expectations lowered by these negative product outlooks, so to were Qorvo and Lumemtums’, for which Apple is responsible for 35% and 50% of revenue, respectively..
These chain of events raised alarm as technology sectors were responsible for causing record new highs in the stock market this year alone. The fall of tech sector leaders like Apple forces stockholders to raise the question of ‘which sectors available could top a company such as this in regards to the tech industry’s common high risk, high return nature’.
In addition, energy conglomerate, General Electric has taken its’ fourth consecutive hit in the past month. Stockholders are contemplating selling their shares in the company due to recent comments from the firm’s CEO regarding its financial performance, failing to comfort current shareholders’ worries about the future financial stake of the company. Ranging from the month of October to today, many stockholders have the conception these declining events are not over. Many of these worries are attributed to questions regarding what could cause market gain, including overall economic growth, Eurozone tensions, consumer device companies, and more. As this world of ours undergoes more geopolitical tensions, it will be nothing more of another causative factor resulting in more resistant stockholders.
As mentioned above, oil companies including US crude oil have been taking a spill in light of what has been occuring in the market itself. US crude oil recently dropped 4% to $59.93 a barrel, wiping out its gains as well as declining for an eleventh consecutive day - a decline not seen since 1983. With the signs of an oil market slowly going into a rut, including a decline in oil barrel prices, it has allowed producers of crude oil to become hesitant in producing output. However, before claiming anything about cutting production, OPEC producers are waiting until the end of 2019 to determine production cuts that will ultimately depend upon oil demand growth.
In response to this week’s financial events, most investors are seeking safety in dividend paying companies that perform ultimately better in times similar to these. Robert Pavlik, Senior Portfolio Manager and Chief Strategist at SlateStone Wealth, claims that stockholders are pointing fingers at any possible reason for the stock market performing the way it is. Pavlik’s standpoint is that the market is simply coming down from the exponential growth that it has had over the past two years.
Could events like these show signs of economic recession? As the market continues to show signs of economic regression, the Federal Reserve is taking their own terms of action by keeping a close eye on increasing bond yields in the market (signaling an increase in demand of these safe financial assets) in hopes to continue their means of increasing the interest rates to take control. By doing this, the effects will go past just the market’s stocks and have lasting effect on monetary policies, mortgage rates, and tighter restrictions, in means to seek control.
CNBC. “Oil Sinks 3%, Settling at $70.97, as Stock Market Falls, Crude Stockpiles Rise.” CNBC, CNBC, 11 Oct. 2018, www.cnbc.com/2018/10/11/oil-markets-global-stock-markets-us-crude-oil-inventories-in-focus.html.
“Apple Suppliers Suffer With Uncertainty Around IPhone Demand.” Google Search, Google, www.google.com/amp/s/www.wsj.com/amp/articles/apple-suppliers-suffer-as-it-struggles-to-forecast-iphone-demand-1542618587.