Forecast Cuts from Apple, Delta Raise Concerns on Corporate Health

By Patrick Thomas

Stocks slumped Thursday as two large U.S. companies slashed their revenue forecasts, prompting fears from investors that more companies are seeing signs of a global economic slowdown.

Apple Inc. (AAPL) cut its quarterly revenue forecast for the first time in more than 15 years as it deals with shrinking demand in China and fewer owners upgrading their smartphones. Shares in Apple fell nearly 9%, serving as the biggest decliner on the Dow Jones Industrial Average in Thursday trading. Delta Air Lines Inc. (DAL) said the pace of ticket-price increases slowed last month, prompting a selloff in U.S. airline stocks.

Kevin Hassett, chairman of the White House Council of Economic Advisers, also warned Thursday that other U.S. firms could join Apple in seeing weaker sales. The White House expected the economy to grow 3% this year, Mr. Hassett said in an interview with The Wall Street Journal. Fed officials projected 2.3% growth when they met two weeks ago.

"There are signs that the Chinese economy is slowing sharply," Mr. Hassett said in the interview. "Multinational firms with profits in China are probably going to see at least that part of their profit picture sour a little bit."

Analysts have largely expected U.S. companies to see slower earnings growth this year. Greg Boutle, U.S. head of equity and derivative strategy for BNP Paribas, is expecting earnings growth for S&P 500 companies to slow to 5% from the more than 20% growth seen in 2018.

The news from Apple and Delta, along with soft guidance form FedEx Corp. and Micron Technology Inc. at the end of last year, has fed into negative market expectations, he said.

"When we start to see a trend of more bearish forward-looking guidance, that is something we would expect investors to start to extrapolate for the broader market," Mr. Boutle said.

Neil Goddin, manager of the Kames Global Equity fund of Kames Capital, said further warnings across multiple sectors, especially from luxury goods and industrials, will likely mean markets will continue to fall.

Mr. Goddin warns markets could go "a lot lower if we truly are entering a meaningful slowdown."

--Lorena Ruibal contributed to this article.

Write to Patrick Thomas at [e-mail]

(END) Dow Jones Newswires

January 03, 2019 14:27 ET (19:27 GMT)

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