Stock indices lost ground in the first half of Monday’s session as protests in China weighed on overall sentiment. Apple (AAPL) iPhone Pro production could be 6 million units lower due to civil unrest and Covid restrictions.
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The Dow Jones Industrial Average and S&P 500 fell 0.8% at lunchtime while the Nasdaq composite lost 0.9%. The Russell 2000 Small Cap Index led the decline, falling 1%.
Volume on the Nasdaq and NYSE surged higher; not hard to do compared to Friday’s half-day session.
Fed Chairman Jerome Powell speaks at the Brookings Institute on Wednesday, ahead of the Fed’s “quiet period” leading up to the mid-December meeting. Emotional market commentary is unlikely on this site, but it could reiterate a slower rate trajectory.
The yield on 10-year Treasury bills remained stable at 3.69%.
Crude oil fell to a 52-week low before bouncing back into the green. It traded at $76.75 a barrel, allaying concerns about China’s demand destruction. OPEC+ meets next weekend to discuss production levels.
Asian and European markets lost ground in quiet action, with many exchanges down around 1%.
Bitcoin stumbled overnight and retested the $16,000 level. Coinbase (COIN) hovered less than three points above last week’s all-time low at 40.61.
Apple Production May Miss Mark
Apple fell 2% at lunchtime. Bloomberg reported that unrest at the Foxconn factory in Zhengzhou could lead to a shortfall of 6 million units in iPhone Pro production in 2022. And that number could increase if Covid restrictions are extended for a few more weeks, according to sources.
Earlier this month, the tech icon cut its annual production target from 90 million to 87 million units. The Zhengzhou factory manufactures the vast majority of iPhone 14 Pro and Pro Max smartphones.
AAPL stock struggled to maintain the 50-day moving average after a two-week test and could sell into horizontal support in the mid-130s. Apple’s performance against the S&P 500 has been falling since september.
Big problem in China
Western media reported continued protests in China overnight, sparked by the Communist Party’s draconian zero-Covid policies. Protests and lockdowns are bad for the global economy because China’s vast consumer population fuels growth.
Social media encouraged the protesters, but many are old enough to remember the 1989 Tiananmen Square massacre. The Chinese government has a brutal history of dissent.
Ironically, Macau granted long-delayed licenses to US casino operators at the same time, lifting Wynn Resorts (WYNN) 2.5% and Las Vegas Sands (LVS) 0.3%.
Both stocks peaked in 2018 and are in long consolidations after mid-pandemic rebounds failed in the first half of 2021.
Jobs, Homes, Retail Sales Top Stock Market Catalysts
No major economic releases are scheduled for Monday as stock market players shake up the holiday spirit. However, we are getting early glimpses of retail performance over the holidays.
Just keep in mind that retail industry groups invariably present early data in a positive light, so it’s best to read it with a skeptical eye.
Home sales and price data later this week should confirm the continued decline in the housing market due to high interest rates. A second reading of third-quarter GDP on Wednesday morning could reveal surprising growth.
The same could be true with Friday’s nonfarm payrolls report. Many companies have announced major layoffs, but the pink slips could wait until January for targeted workers to enjoy their vacations.
Increase in sales during the holidays
Black Friday bricks and mortar sales rose 2.9%, according to retail analytics provider Sensormatic Solutions. Online shoppers didn’t wait for Cyber Monday sales, pushing e-commerce revenue to $9.12 billion, up 2.3% from 2021. But those numbers might not. not generate significant profits for retailers due to high discounts and higher unit costs, driven by inflation.
Buy-it-now and pay-later orders were up 78% last week, while revenue from these transactions soared 81%. This phenomenon highlights growing economic stress in American households.
“While Black Friday hit record spending online, we’re also seeing stronger signs of a budget-conscious consumer this year,” said Vivek Pandya, principal analyst at Adobe Digital Insights. “Shoppers are embracing the Buy Now Pay Later payment method more this year so they can purchase desired gifts for family and friends.”
The National Retail Federation expects 2022 holiday sales to grow between 6% and 8%. While better than the 10-year average of 4.9%, it’s far worse than 2021’s record 13.5% rise fueled by optimism as the pandemic wanes.
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Stock market movers and shakers
Selling power (CRM) tops the stock earnings calendar this week, with the Dow Jones component expected to post a profit of $1.22 per share on $7.83 billion in revenue in Wednesday’s aftermarket session.
The CRM stock has suffered like the rest of the tech universe this year, with growth stalling after a nearly endless upward trajectory. It is vastly underperforming the S&P 500, with a miserable relative strength rating of 27. Worse still, earnings are set to decline in 2023, marking the second consecutive year of earnings declines.
In a painfully ironic act, the Dow Jones Committee made room for Salesforce in August 2020 by removing Pfizer (PFE), less than three months before the pharmaceutical giant shocked the world with research into its Covid-19 vaccine.
Salesforce shares traded up 0.3% in the first half of Monday’s session.
Solar game and component IBD 50 Shoals Technologies Group (SHLS) fell into the buy zone, falling 5.2% in the second week after breaking above the 28.57 buy point of a phase 1 consolidation.
SHLS stock widened at high volume on Nov. 15, adding almost 22%.
Follow Alan Farley on Twitter at @mstrader.
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