After a strong opening for the second-quarter reporting season, US stocks reversed course on a raft of earnings disappointments as Wall Street succumbed to lack of confidence this week.
Traders also bared their doubts about the US economy’s breakaway from the rest of the globe on Friday, when shares sank more than 1 percent after poor Chinese data drove down oil and other commodity-tied companies.
For the week, the Dow Jones Industrial Average slid 2.9 percent to 17,568.53, and the broader S&P 500 fell 2.2 percent to 2,079.65.
The NASDAQ began the period looking like it would buck the trend on the back of the two largest US companies, Apple and Google. The Nasdaq Composite struck a new record close of 5,218.86 on Monday.
However, investors tossed in that towel, too, dumping Apple shares on Wednesday after its “only” 38 percent gain in net income in the quarter ending June 27, to US$107 billion.
Apple ended up losing 4 percent for the week and dragging down Google, the previous week’s earnings king, 7.3 percent.
By the end of the week, the NASDAQ Composite had given up 2.3 percent at 5,088.63.
Friday’s sell-off came despite a 10 percent gain by Amazon — which surprised with a modest profit in the second quarter and became larger by market capitalization than the country’s largest traditional retailer, Walmart.
The market also found little happiness in the US$54 billion merger of Anthem and Cigna, which will establish the largest US health insurer.
“An unexpected decline in US new home sales and a disappointing read on Chinese manufacturing output sapped sentiment,” Charles Schwab & Co said.
That could be true, but it also suggested that bullishness was already in short supply on the Street.
“There were far more losers on Friday than winners as economic slowdown concerns and valuation concerns got the better of market participants,” Briefing.com said.
The earnings picture for the broader market was mixed. Many companies beat profits forecasts, but failed to show strength in revenue gains and other indicators of growth, according to Briefing.com. That included companies like Caterpillar, 3M, McDonald’s, American Express and Microsoft. Apple’s sell-off on Wednesday was largely because iPhone sales growth did not match a very high estimate from analysts.
“The problem continues to be that, at 2,120 points, the S&P is overvalued,” Hugh Johnson of Hugh Johnson Advisors said.
“It’s hard to make the case that earnings are strong enough to take us through that level. So long as we have generally negative earnings, or low positive numbers, it’s going to be hard to make a move up for stocks,” he said.
Tom Cahill of Ventura Wealth Management warned of more volatility until there is a clearer picture for earnings trends.
“The good news is that the economy seems to be rebounding... Eventually earnings should follow a potential upswing” in growth, he said.
Traders will be keeping an eye on fresh US data and a Federal Reserve policy meeting next week, with the US central bank expected to update its views on a coming interest rate rise, but not go so far as to announce one.
“The post-meeting statement will sound modestly more upbeat on the economy, but the inflation backdrop will remain a concern. Officially, we still have the Fed hiking in September,” Deutsche Bank said in a client note.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is