Apples stock decline weighs on the broader market

Larry Benedict Speaking With Market Watch

U.S. stocks pivoted lower early Wednesday, with the Dow gathering losses as blue-chip component Apple Inc. was on the brink of entering bear-market territory, weighing on Wall Street.

How are the benchmarks faring?

The Dow Jones Industrial Average DJIA, -1.06% fell 55 points, or 0.2% at 25, 231. If the losses hold, Wednesday would mark the fourth consecutive loss for blue chips, the longest streak since Aug. 13, according to FactSet data. The S&P 500 index SPX, -0.99% ESZ8, -1.19% is down 0.2%, or 4.2 points, to 2,718, as it seeks to avoid five straight down days. Meanwhile, The Nasdaq Composite IndexCOMP, -1.00%  is falling 21 points, or 0.3%, at 7,180.

On Tuesday, the Dow slid 100.69 points, or 0.4%, to 25,286.49; the S&P 500 fell 4.04 points, or 0.2%, to 2,722.18; while the Nasdaq Composite Index edged up 0.1 point to 7,200.87.

What’s driving the market?

Casting a pall over market sentiment on Wednesday was a drift lower by shares of Apple IncAAPL, -2.79%  toward a bear market, defined as a decline of at least 20% from a recent top. Apple’s shares off 1.8% are down about 18.5% since a peak in early October. By dint of its lofty market value and share price, the iPhone maker has been a key proxy for investment sentiment and momentum on Wall Street because the Nasdaq and S&P 500 index are market-capitalization weighted gauges, while the Dow is a price-weighted index.

Apple’s stumbles, amid continued worries about revenues at the technology behemoth, come as oil’s abrupt and sharp price decline has stabilized, providing some support for assets perceived as risky.


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Meanwhile, in Europe, investors were watching the latest developments in the Brexit negotiations after Britain and the European Union on Tuesday hammered out a provisional deal on the U.K.’s exit from the bloc and are approaching an “endgame,” as Prime Minister Theresa May has described developments.

However, May must secure support for the proposal with her cabinet to move forward, and the politics around the exit from the European trade bloc have been fraught.

On the trade front, investors have been dealt conflicting views from the Trump administration, with National Economic Council Director Larry Kudlow on CNBC Monday taking issue with comments made by Peter Navarro, Trump’s trade adviser, who said: “globalist billionaires” are ratcheting up pressure on the White House to end its standoff with China on trade issues.

The public disagreement between the two White House officials raises questions about the negotiating strategy between China and the U.S. in testy tariff talks.

Late Tuesday, Bloomberg News reported that the Trump administration will hold off on imposing tariffs on auto imports—for now.

What were strategists saying?

“We’ve had three different trading days wrapped into one, even before the market opened,” Larry Benedict, founder of The Opportunistic Trader, told MarketWatch. “Futures were very soft early this morning, but we rallied along with European stocks,” as the start of trade neared, Benedict said.

“The CPI reading was in line with expectations, maybe a bit better than expected, and the market took the cue to firm after those numbers,” he said.

“We are by no means out of the woods here,” Benedict, however, warned. “Today looks OK at the open, but its skittish. If this were a real move higher, volatility wouldn’t be near 20—I’d want it to be closer to 15,” he said.

Tom Essaye, founder of the Sevens Report, wrote in a note to clients that inflation data will be in focus, given the release of CPI data. The most important inflation gauges have risen throughout 2018, including core CPI, which hit a high in year-over-year growth in July, making “it somewhat easy to see why the Fed has turned, on the margin, hawkish,” he wrote.

But Wednesday’s CPI reading, which reported strong month-over-month growth, still shows annual growth in prices below its 2018 peak. These data “set up the potential for either a looming ‘dovish pivot by the Fed in coming months (think early ‘19) or a Fed policy mistake,” according to Essaye.

“The searing oil price dive continues to echo, whilst sterling-borne Brexit optimism wavers,” wrote Ken Odeluga, market analyst at City Index, in a Wednesday research note.

Which stocks were in focus?

Shares of Canopy Growth CorpCGC, -15.59% tumbled 9.3% at the start of trade Wednesday, after the Canada-based cannabis company reported a wider fiscal second-quarter loss and revenue that rose less than expected.

Tilray Inc. TLRY, -9.45% shares are also down 9.3% early Wednesday, after the cannabis firm announced that third-quarter losses widened to 20 cents per share Tuesday afternoon.

Vapotherm IncVAPO, +8.29% priced its initial public offering late Tuesday at $14 a share, the low end of its $14 to $16 price range.

Energy stocks are in focus Wednesday, after a 7% decline in the price of oil Tuesday helped drag the sector down 2.3%, as measured by the SPDR Energy Select Sector ETF XLE, -0.66% As crude oil stages a modest relief rally before the start of trade Wednesday, and with natural gas NGZ18, +16.80% up more than 7%, energy firms Cabot Oil and COG, -2.59%  paired early gains to be down 1.3%, while Apache CorpAPA, +2.16% is gaining 3.5%.

Shares of Kellogg CoK, -2.52% are under pressure before the bell Wednesday, down 1.8%, following an investor day presentation by management Tuesday, and J.P. Morgan’s downgrading of the stock from overweight to neutral.

Snap IncSNAP, -3.80%  stock is down 1.9% Wednesday morning, after the social-media company disclosed on Tuesday that is has received subpoenas and requests for information from the Securities and Exchange Commission, as well as the Justice Department, related to the firm’s disclosures to investors in the run up to its 2017 initial public offering.

Shares of Tencent Holding LtdTCEHY, +4.64% are rising 4.9% early Wednesday,after the firm reported 30% profit growth in the third quarter.

Canada Goose Holdings IncGOOS, +7.13% stock is surging more than 14%, after the luxury apparel firm beat Wall Street expectations Wednesday morning for second-quarter profit and sales, while raising its sales growth outlook,

What data and speakers are ahead?

The Labor Department announced Wednesday that the consumer-price index rose by 0.3%, matching expectations, according to consensus estimates from analysts polled by MarketWatch. Core CPI, excluding volatile food and energy prices, rose 0.2%, also matching expectations.

Randal Quarles, the Fed’s vice chairman for supervision, is scheduled to speak at 9 a.m. He is a voting member of the Federal Open Market Committee. Later, a Q&A with Jerome Powell is scheduled for 6 p.m. Eastern, well after the market closes on Wednesday.

How are other markets trading?

Oil markets are being closely watched Wednesday, after a steep decline in crude prices weighed on investor sentiment Tuesday. Crude oil CLZ8, +1.42% is recouping some of those losses Wednesday, up 1%. Gold prices GCZ8, +0.99%and the dollar DXY, +0.21% were virtually unchanged.

Asian stocks were modestly lower Wednesday, while European stocks were under pressure, with the Stoxx Europe 600 SXXP, -0.60% falling 0.1%.


By: Mark Decambre and Chris Matthews