Stocks Cough Up All Their Gains For The Year As Rout Deepens

Tuesday, November 20th 2018, 12:28 pm
By: News 9

Stocks declined in early trading Tuesday, with technology stocks adding to the losses suffered on Monday and as Target missed its earnings forecast, spooking some investors. 

The Dow fell more than 500 points at one moment, before recovering slightly. The index stood at 24,586 at 11:00 a.m. Eastern time, 1.7 percent below Monday's close. The S&P 500 also fell 1.3 percent, and the tech-heavy Nasdaq fell 1.2 percent.

The rout has effectively erased all stock market gains for 2018.


The deepening losses among tech giants such as Apple and Facebook come amid fears of slowing sales growth and concern about government regulation. Apple lost 4 percent of its value on Monday, while Facebook gave up 5.2 percent. With Apple's slump, the stock is nearing a bear market, shedding almost 20 percent of its value from its most recent high.

"As much as the companies could do no wrong when investors were positively inclined towards them, Amazon, Netflix, Facebook and Microsoft are now selling off much quicker than other stocks," said Fiona Cincotta, senior market analyst at CityIndex, in a research note. 

She added, "Part of the problem is that investors no longer expect an average growth in profit; if the sales are not double digit and spectacular – as is the case in with the latest iPhone - the disappointment quickly translates into a selloff in shares."

Target miss

Target, meanwhile, reported third-quarter profit that missed investor expectations. The shares fell sharply before the opening bell. 

The company on Tuesday posted net income of $622 million, or $1.17 per share. Per-share earnings without one-time benefits and pretax gains were $1.09, 2 cents short of expectations, according to a survey by Zacks Investment Research.

Revenue for the Minneapolis retailer was $17.82 billion, just edging out Wall Street expectations.

Revenue at stores opened at least a year rose 5.3 percent, its sixth consecutive quarter in that direction. And online sales soared 49 percent. In the previous quarter, Target racked up the strongest same-store sales growth in 13 years.

"Operating profit is down by 3.3 percent over the prior year," noted Neil Saunders, managing director of GlobalData Retail, in a research note. "We believe that this modest decline reflects a number of pressures including higher staff wages, fulfillment expense, some investment costs, and a slight decline in gross margins."

He added, "While this is unfortunate, we see this decline as necessary to support Target's growth ambitions. Some on Wall Street may lament the dip, but the truth is you cannot reinvent a retailer on the cheap. Target is not doing that and we applaud them for it."

Trade worries

Investors are also focused on simmering trade tensions between Washington and Beijing after the two governments clashed at a weekend conference. The two countries have raised tariffs on billions of dollars of each other's goods in a fight over China's technology policy. 

Presidents Donald Trump and Xi Jinping are due to meet this month at a gathering of the Group of 20 major economies. At the weekend meeting in Papua New Guinea, Trump's vice president, Mike Pence, criticized Beijing for intellectual property theft, forced technology transfers and unfair trading practices.

"The conviction for a bounce back into the year end for equity markets can be seen slowly diminishing as worries across a variety of issues entrench themselves," Jingyi Pan of IG said in a report. Pan said investors are shifting to safe havens amid uncertainty ahead of the G20 meeting.

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