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What you need to know in markets Thursday

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Crude oil snapped its longest losing streak on record.

West Texas intermediate (CL=F), the domestic benchmark, snapped its 12-day losing streak Wednesday, rising 1.01% to $56.25 per barrel. Brent crude (BZ=F), the international benchmark, rose 1.02% to $66.14 per barrel. This followed reports that that OPEC and its partners are considering cutting output by 1.4 million barrels per day in 2019, a larger reduction than previously anticipated to offset concerns of a global supply glut.

Equities were a different story Wednesday, with each of the indices closing lower. The S&P 500 slipped 0.75%, or 20.36 points as of market close, posting a fifth consecutive day of declines led by Apple (AAPL) and banking stocks. The Dow (^DJI) fell 0.81%, or 205.25 points. The Nasdaq (^IXIC) declined 0.9%, or 64.48 points.

After a relatively quiet couple of months, cryptocurrencies are back to making headlines, with Bitcoin tumbling below $6000 for the first time since August. Prices (BTC-USD) dropped to as low as $5,322 on Wednesday, or the least since October 2017. Other tokens including Ethereum and Litecoin also took a dive.

“Price volatility is not unusual in the crypto landscape — however, today’s dip is significant enough to prompt industry players to stop and take stock of the reasons why. It’s safe to say that Bitcoin Cash’s upcoming hard fork was stirring uncertainty amongst crypto investors, and forecasters across crypto and traditional markets alike have predicted a prolonged bear market heading into 2019,” said Donald Bullers of Elastos. “Investors have proven to be highly reactive to changes across the landscape, and this dip could be the most recent case study of that phenomenon.”

On Thursday, Bitcoin Cash – itself a spinoff of Bitcoin – will undergo a so-called “hard fork” change in protocol and split into new separate coins. Some investors believe investors may have left Bitcoin to shore up funds to buy Bitcoin Cash following the split, expecting appreciation of value in the new coins.

Economic calendar and earnings

The US Commerce Department will release retail sales data for October on Thursday at 8:30 a.m. ET. Consensus expectations are for advance retail sales to have increased 0.5% in October, up from 0.1% in September. Excluding autos and gas sales, consensus anticipations are for a 0.4% pace of increase, from a flat rate in September.

“Robust retail sales numbers for October would signal a strong start to the fourth quarter,” Ian Shepherdson, chief economist at Capital Economics, wrote in a note. “Auto sales have been strong in the past two months, and chain store sales growth has surged.”

Additionally, the Bureau of Labor Statistics will report October data for US import prices on Thursday. Import prices are expected to have risen 0.1% in October. In September, prices increased 0.5% due to higher fuel prices, after declining 0.4% in August and 0.1% in July. For the 12 months ending in October, analysts expect import prices to have increased 3.3%, from 3.5% for the 12 months ending in September.

The BLS’s weekly report for initial jobless claims will also come out Thursday at 8:30 a.m. Consensus estimates are for 213,000 new unemployment claims, down by one thousand from the week prior. However, continuing claims are anticipated to rise slightly to 1.625 million.

On the earnings front, retail giants will draw focus on Thursday. One of the biggest names set to report tomorrow is Walmart (WMT), with results coming in before the bell Thursday. The country’s largest employer is expected to deliver adjusted earnings of $1.01 per share on revenue of $125.49 billion and post a gross margin of 24.78%.

Nordstrom (JWN) will also report quarterly results Thursday. Investors will be looking for a repeat performance after the department store chain beat Wall Street’s expectations for earnings and sales in August and cited strength in its e-commerce business. Nordstrom is expected to deliver adjusted earnings of 66 cents per share on revenue of $3.7 billion. Shares of Nordstrom are up about 30% this year as of market close Wednesday.

Energy companies led U.S. stocks broadly higher in early trading Wednesday, wiping out some of the market’s losses from a day earlier. (AP Photo/Richard Drew)
Energy companies led U.S. stocks broadly higher in early trading Wednesday, wiping out some of the market’s losses from a day earlier. (AP Photo/Richard Drew)

Now, here’s what caught Myles’s eye today:

Wall Street is souring on Apple

Apple (AAPL) is now down almost 20% from its all-time high.

The company, still the largest publicly-traded company in the world, now has a market cap below $900 billion. Earlier this year, Apple became the first company with a market capitalization north of $1 trillion.

And since the company’s disappointing quarterly earnings and the announcement that it would no longer report iPhone unit sales, both investors and Wall Street analysts have soured on the stock.

Since reporting earnings on November 1, shares of Apple are down more than 10%. And Wall Street analysts continue to pare their expectations for the company as Apple suppliers make the outlook for the iPhone even murkier.

On Wednesday, UBS cut its price target on Apple shares to $225 from $240, saying that Apple has likely taking around 6-7 million units out of its initial expectations for a build of around 63 million new iPhone models, split evenly between the XR and XS models.

The firm added in its note that there remain downside risks to Apple’s iPhone outlook, with guidance cuts from Apple suppliers Lumentum (LITE) and Qorvo (QRVO) painting an even more negative picture than the firm’s baseline expectations for a reduction in iPhone orders.

“We think there is an inventory component that is still negatively affecting the supply chain,” UBS said, indicating that Apple may be as many as 10 million units shy of what Wall Street had initially expected.

Robert Cihra at Guggenheim on Wednesday downgraded shares of Apple to Neutral from Buy and the firm removed their price target on the stock; previously, Guggenheim had a $245 price target on shares.

“A year ago AAPL looked like a table-pounder when iPhone units were weak,” Guggenheim wrote in its note on Wednesday. “But [these results are] about to be more than offset by a big jump in ASPs (+17%Y/Y in FY18), which ultimately drove Apple’s best iPhone revenue growth in 3 years, we rather now find that setup flipped with ‘growth via ASPs’ widely known but just as those ASPs start to anniversary.

“Over the past 10 years, Apple’s iPhone ASP has increased a dramatic $220, or 40%, reflecting its growing value to both consumer and business markets, but nearly HALF of all that just came in FY18 alone, making a period of digestion now likely.”

Stripping out some analyst-speak, Guggenheim thinks the story of ever-more-expensive iPhones has already been priced into the stock, with investors now growing concerned over slowing overall iPhone sales. Which, of course, comes right as Apple stops reporting individual unit sales. And right as its suppliers start suggesting these unit sales may be even worse than forecast.

And that the story around Apple, a company that makes billions in profit each quarter and sells hundreds of millions of iPhones each year, has become so touchy that news from its supply chain is shaking the market’s faith in the world’s largest company also indicates how fragile this market has become.

As Bloomberg’s Andrew Cinko noted Wednesday, Apple’s correlation with the S&P 500 is double what it was last year and far larger than what it was in 2013-14 when Apple shares fell about 30%. Which means as the market goes, so goes Apple.

“This year Apple well and truly is the stock market once again,” Cinko writes, “and its price action lately has been stirring up troubling signs about what might be next for equities.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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