Dow Jones Today: When Bad News From Apple Isn’t All That Bad

Apple's bad news didn't lead to big losses for broad benchmarks on Tuesday.

Apple - Dow Jones Today: When Bad News From Apple Isn’t All That Bad

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It would be reasonable to expect that after Apple (NASDAQ:AAPL), the largest U.S. company by market value, withdraws its guidance for the current quarter due to the Covid-19 virus, which the iPhone maker did Monday afternoon, that stocks would falter in the wake of that announcement. Actually, the opposite proved to be true as the major indexes averted large losses on Tuesday, the first trading day of the week.

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  • The S&P 500 lost 0.29%.
  • The Dow Jones Industrial Average gave up 0.56%.
  • The Nasdaq Composite eked out a gain of o.02%.
  • Although there were some concerns about its earnings report, Walmart (NYSE:WMT) was the best performer on the Dow Jones today gaining 1.34%.

Due to the coronavirus, Apple suppliers had to shutter factories in China, which prompted the guidance withdrawal revealed Monday afternoon.

“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” said the California-based company in a statement. “As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.”

The skinny with those two factors is that because those plants have been closed, iPhone 11 supply is being crimped, and because Apple shuttered its retail stores in China due to the coronavirus, demand there is being pinched. However, the company did say demand for its products outside of China remains strong.

Obviously, this isn’t great news for Apple, but many analysts are betting it’s near-term blip. Apple, wasn’t even the worst-performing Dow Jones stock today. That dubious distinction belongs to Walgreens (NASDAQ:WBA).

Not So Great

Give Walmart some credit. As noted above, it was the best-performing Dow Jones name today despite a tepid fiscal fourth-quarter earnings report and similarly lukewarm guidance. For the fourth quarter, the largest domestic retailer said it earned $1.38 per share on sales of $141.67 billion while Wall Street was expecting earnings of $1.43 on revenue of $142.49 billion. Same-store sales increased 1.9%, below the 2.3% analysts expected.

The Arkansas-based company forecast full-year earnings of $5 to $5.15 per share, below the consensus estimate of $5.22.

Walmart unveiled a modest dividend hike, but the reason the stock rallied today, if I had to guess, would be the 35% growth in its e-commerce unit last quarter and the forecast of 30% growth for that business this year.

Intel Infected

Intel (NASDAQ:INTC) has been a darling stock to start 2020, but with Apple trading lower on supply concerns, chip stocks followed suit. In fact, Intel was one of the worst-performing Dow components in the Dow today, but the reality is it’s not highly dependent on Apple or China’s Huawei as big revenue drivers.

As is the case with Apple, Intel’s Tuesday troubles could be short-term in nature as the company remains strong with stout fundamentals.

Reasonable Explanation

Travelers Companies (NYSE:TRV) was among the Dow offenders today and it’s easy to see why. It was revealed late last Friday Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) slashed what was once a 6 million-share stake in Travelers to 312,379 shares. TRV has been a laggard, gaining just over 8% over the past 12 months while the Dow is up more than 15% over that time.

Bottom Line on the Dow Jones Today

For those looking to quantify just how many U.S. companies are mentioning the coronavirus on earnings calls, FactSet puts the number at 364 of the S&P 500 in a note dated Feb. 14, meaning it doesn’t include Apple’s withdrawal of guidance and what Walmart had to say on the issue earlier today.

“Of these 364 companies, 138 (38%) cited the term ‘coronavirus’ during the call,” writes FactSet’s John Butters. “At the sector level, the Industrials (26), Information Technology (26), and Health Care (24) sectors have seen the highest number of companies discussing ‘coronavirus’ on earnings calls of all 11 sectors.”

As of this writing, Todd Shriber did not own any of the aforementioned securities. He has been an InvestorPlace contributor since 2014.

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