U.S. equities continue to move lower on Tuesday as Wall Street sours on the policy implications of the Trump White House, turning from a focus on positives on tax reform to negatives (for big business), such as a clampdown on immigration and “chaos” amid a fight with congressional democrats over everything from cabinet picks to executive actions.
Currency valuations were in focus, with White House trade advisor Peter Navarro telling the Financial Times that the euro was “grossly undervalued” in a swipe at German manufacturers.
In the end, the Dow Jones Industrial Average lost 0.5%, the S&P 500 shed 0.1%, the Nasdaq Composite gained a fraction and the Russell 2000 finished the day 0.7% lower.
Treasury bonds were mostly stronger, gold rallied 1.3%, the dollar weakened after Trump complained of foreign currency devaluations on Twitter (hitting the “strong dollar” post-election trade) and crude oil gained 0.3% after giving up earlier strength. Energy weakened after the close as the biggest inventory build since October was reported.
The drop in yields boosted the ProShares Ultra Treasury Bond ETF (NYSEARCA:UBT) 1.1% for Edge subscribers. Defensive utility stocks also benefited, rising 1.6% followed by healthcare and REITs. Industrials and financials were the laggards, down 0.9% and 0.7%, respectively.
Luxury handbag maker Coach Inc (NYSE:COH) rose 3.8% after reporting a small quarterly earnings beat on an acceleration in North American comp-store sales to 3%. Margins expanded as well. On the downside, sportswear maker Under Armour Inc (NYSE:UAA) fell nearly 26% after reporting a top- and bottom-line miss and lowered forward guidance on margin pressure from sales mix. Multiple analyst downgrades followed.
United Parcel Service, Inc. (NYSE:UPS) fell 6.8% after reporting weaker-than-expected revenues and earnings as well as lowering forward guidance. Management cited ongoing softness in industrial production and a challenging shift in its service mix. Harley-Davidson Inc (NYSE:HOG) fell 1.5% as earnings came in weak on a 6% miss to motorcycle revenue. Global sales unexpectedly fell 0.5%.
After the close, Apple Inc. (NASDAQ:AAPL) gained 2.5% in extended trading after reporting better-than-expected earnings of $3.36 per share on revenues of $78.4 billion (beating estimates of $77 billion) — a new quarterly record for sales.
IPhone shipments were strong, coming in at 78.3 million vs. 74.8 million last year and the 77 million that analysts expected returning the critical business segment to year-over-year growth. IPad shipments were weak, however, at 13.1 million versus 16.1 million last year and 15.5 million expected. China revenue was soft as well, down to $16.2 billion versus $18.4 billion last year. The company’s net cash hoard also rose to a new record of $159 billion, most held offshore.
Questions continue to linger, however, over the health of the iPhone business after a number of quarters of disappointing results and a recent report in the Nikkei that production could be cut by 10% due to sluggish sales. Management also issued downside guidance, looking for fiscal Q2 revenues of between $51.5 billion and $53.5 billion vs. the $54.05 billion analysts expected. And net income still fell by 2.6% from last year despite that record quarterly revenue take, as the earnings per share metric got a boost from the 4.8% drop in the number of shares outstanding (due to buyback efforts).
Looking ahead, all eyes are on Wednesday’s Federal Reserve policy statement. Watch for a hawkish takeaway as inflation has risen and officials have grown concerned about economic overheating.