Wall Street is heading for a rocky time later today after Apple and Microsoft surprised on the downside in quarterly earnings reports this morning, and a weak performance by IBM and other big tech stocks pushed US markets down by around 1% for the Dow.
The S&P 500 and Dow fell by smaller amounts, but the weak earnings update from Apple in particular will hit sentiment during the day and tonight. Apple shares were down more than 7% in after hours trading as investors gave the June quarter figures the thumbs down.
Earlier Microsoft revealed weaker than expected revenues (they fell) and it confirmed a huge write down in the value of the faltering Nokia mobile phone business – in fact Microsoft reported a big loss for the quarter after that impairment. Yahoo, another tech stock, added to the negative feeling by reporting a weaker than expected result.
The weaker than forecast results from the trio was in contrast to the very positive sentiment in the wake of the Netflix and Google quarterly reports last week which powered Nasdaq to new all time highs.
Gold prices eased $US7 in late trading, oil was marginally higher, but not convincing, and the dollar traded over 74 US cents and was around 74.20 just after 7 am.
As a result, our market will start with losses of close to 30 points, according to trading on the overnight futures market. The weaker than forecast result from Apple might add to the selling in early trading.
Apple shares were down more than 7% just after 7.30am, as investors reacted negatively to the data on iPhone sales and the first estimate of Apple Watch sales (which were not clearly given by the company).
Apple reported a 32.5% rise in quarterly revenue, helped by 35% surge in sales of its flagship iPhones.
Apple said net income rose to $US10.68 billion, in its third quarter ended June 27, from $US7.75 billion, a year earlier.
The company said it sold 47.5 million iPhones in the quarter, and revenue rose to $US49.61 billion from $US37.43 billion. The iPhones sales figures were around 1.5 million under market estimates.
Chinese revenues leapt 112% to $US13.2 billion, while the Americas, Apple’s largest region, saw a rise of 15% to $20.2 billion. But those Chinese sales were lower than the second quarter when they totalled $US16.8 billion as sales of the iPhone 6 soared, especially the larger screen version.
Apple said it sold $US31.37 billion worth of iPhones, $US6.03 billion of Macs and $US4.54 billion worth of iPads.
Although Apple did not break out sales figures for its new Watch, which was released early in the quarter, the company described the launch as “successful”. But it didn’t break out separate data on the watch. Apple executives told a briefing that the Watch sales had beaten internal estimates, but no estimates.
It merely included them in “Other” revenue, which rose from $US1.77 billion a year ago to $US2.6 billion this year. Marketwatch said analysts were expecting $US1.84 billion in Watch sales, so the reported figures suggest a shortfall in sales.
US analysts pointed out that The third quarter is always weaker in terms of iPhone sales compared with the first and second quarters – but the slowdown was worse this year compared with the prior two years, according to Morgan Stanley analyst Katy Huberty.
Not helping market sentiment was the weaker than expected outlook forecast from the company. Marketwatch pointed out that "Apple revenue guidance for fourth quarter mostly below analyst expectations. It’s guiding between between $US49 bln and $US51 bln, vs. FactSet est. of $US50.8 bln.”
