Stocks tumbled Monday as technology shares were routed and investors fled from growth stocks. The Dow Jones Industrial Average (DJINDICES: ^DJI) lost more than 500 points at its nadir, but partially recovered at the end of the day. The S&P 500 (SNPINDEX: ^GSPC) also posted a significant decline, and the tech-heavy NASDAQ Composite (NASDAQINDEX: ^IXIC) plunged 3%.
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The Technology Select Sector SPDR ETF (NYSEMKT: XLK) lost 3.8%, and narrower indexes of internet stocks fared even worse; the First Trust Dow Jones Internet ETF (NYSEMKT: FDN) tumbled 5.1%.
Apple (NASDAQ: AAPL) led the market downward due to concerns about iPhone sales, and JD.com (NASDAQ: JD) contributed to the sell-off with disappointing guidance.
Image source: Getty Images.
Apple investors continue to worry about iPhone sales
Apple shares continued their recent decline, falling 4% after The Wall Street Journal published an article that reinforced the market's worries about iPhone sales. The article quotes "people familiar with the matter" as saying that the company has slashed its production, throwing suppliers into turmoil.
Apple stock has fallen 16% since the company's Nov. 1 earnings announcement, when it issued guidance below expectations and said it would no longer report iPhone unit sales, inciting some investors to worry that the company was hiding something. Last week, two Apple suppliers, Qorvo and Lumentum, issued press releases revising guidance their downward and leaving little doubt that changes to iPhone-related orders were the issue.
The market seems to be assuming that the production changes are being made as a result of information that arrived after Apple's conference call just under three weeks ago, when the company warned of uncertainties in "supply demand balance" for its phones, and accounted for that in its guidance. That may or not be true, but these sorts of worries do seem to spread whenever Apple releases a new update of its flagship devices.
JD reports slowing sales growth
Shares of Chinese e-commerce company JD.com fell 8.4% after it reported better-than-expected profits for its fiscal third quarter, but gave disappointing guidance for Q4. Revenue grew 25.1% to 104.8 billion yuan ($15.3 billion), about what analysts were expecting. Adjusted earnings per share were $0.12, ahead of the $0.10 analyst consensus.
But JD said it expects Q4 revenue of between 130 billion yuan and 135 billion yuan, which would amount to an increase of between 18% and 23% over last year. Analysts had been expecting a forecast for 23.5% growth, and even that would have been well below the 38.7% growth it achieved in Q4 2017. The company is seeing a slowdown in sales of big-ticket items; on the conference call, management said the guidance reflects "relatively soft retail sales in certain durable goods categories."
The e-commerce giant is also dealing with issues related to the arrest of its CEO for sexual assault, as well as a current distaste among investors for Chinese stocks broadly, so news of the sales growth slowdown understandably hit the shares hard.
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Jim Crumly owns shares of Apple and JD.com. The Motley Fool owns shares of and recommends Apple and JD.com. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.