US Stock Market: Apple Suppliers at Risk along with China-exposed Chipmakers

The major U.S. stock indexes finished mixed on Tuesday with the NASDAQ Composite Index bucking the trend to close higher for the session despite a sales warning from communications giant Apple, Inc. The recovery in the NASDAQ surprised traders since Apple is heavily weighted in the index. The NASDAQ made its recovery as Apple trimmed losses late in the session.

In the cash market, the benchmark S&P 500 Index settled at 3370.29, down 9.87 or -0.30%. The blue chip Dow Jones Industrial Average finished at 29232.19, down 165.89 or -0.58% and the technology-based NASDAQ Composite Index closed at 9732.74, up 1.56 or +0.02%.

Apple and Friends at Risk

Late Monday, Apple warned it would fall short of its recently announced quarterly sales target because of slower iPhone production and weaker demand in China due to the coronavirus outbreak, but the price action suggests this is not a major problem for technology investors.

While the exact hit to economic and earnings growth from the epidemic in China remains a mystery, hopes that the damage would only be temporary continues to boost confidence on Wall Street in recent sessions.

Investors may have taken it easy on Apple shares late in the day, but traders are paying attention to its suppliers to see if the communication company’s issues are spreading. Apple suppliers Qualcomm, Inc., Broadcom, Inc. Qorvo Inc., and Skyworks Solutions, Inc., all ended down between 1% and about 2% on the day.

Moving forward, investors are going to be paying close attention to how other major technology companies doing business in China respond to the crisis. Of particular interest will be companies in Apple’s supply chain.

China-exposed chipmakers slipped, with the Philadelphia SE Semiconductor Index shedding 1.4%, while the broader S&P technology sector lost 0.4%.

The Internals

On Tuesday, declining issues outnumbered advancing ones on the NYSE by a 1.37-to-1 ratio; on NASDAQ, a 1.21-to-1 ratio favored decliners.

The S&P 500 posted 71 new 52-week highs and 7 new lows; the NASDAQ Composite Index recorded 127 new highs and 66 new lows.

Volume on U.S. exchanges was 7.23 billion shares, compared to the 7.61 billion average for the full session over the last 20 trading days. This number suggests that volume didn’t rise in reaction to the Apple warning, indicating that investors took the news in stride.

US Stocks Making Biggest After-Hours Moves

Lending Club – Shares of the fintech company were down 1.98% in extended-hours trading after it announced plans to pay $185 million in cash and stock for Radius Bancorp.

Groupon – Stock of the online commerce company fell 25% in extended trading after the company missed estimates for fourth-quarter profits and revenues.

Herbalife – Shares of the health nutrition company climbed 5% in extended-hours trading after the company reported strong fourth-quarter earnings that beat expectations.

Diamondback Energy – Shares of the oil and gas company climbed about 2% in extended trading after beating analyst expectations for revenue in the fourth quarter and announcing a cash dividend for the quarter.

US Stocks Edging Higher

The U.S. stock market is expected to open higher on Wednesday based on the early futures trade.