Stocks are off to a rough start to the new week and noted cross-asset strategist Donald Trump has a theory as to why.
“The prospect of Presidential Harassment by the Dems is causing the Stock Market big headaches!”, the President exclaimed on Monday morning, as stocks pushed to the lows of the day shortly before lunchtime.
To be clear, Monday’s early-session losses on Wall Street had absolutely nothing to do with “Presidential Harassment”, which is just a made-up proper noun.
Stocks are on shaky footing to start the week for a couple of readily discernible reasons, not the least of which is the still cloudy outlook around trade. In addition to that, the Nasdaq is under still more pressure thanks in no small part to Apple, which is suffering from renewed concerns about iPhone demand.
”The iPhone story is showing cracks with contacts now citing weaker iPhone orders year over year and Baidu iPhones search trends highlighting a red flag,” Longbow’s Shawn Harrison wrote in a note to clients, adding that searches for iPhone on Baidu “fell off a cliff for October, indicating potential risk of faltering China demand.”
But the real problem is obviously Lumentum, which slashed its FYQ2 outlook citing a “meaningful reduction” in shipments from a major customer, which the market clearly believes is Apple, whose shares are now on track for their worst month since 2016. Here’s Wells Fargo to explain:
Apple shares are under pressure this morning (11/12) following a negative preannouncement by key supplier, Lumentum. Lumentum is a provider of 3D sensing solutions (VCSELs and edge emitting lasers) for mobile devices — most notably Apple’s iPhone. Lumentum has disclosed that Apple accounted for ~30% of total revenue in the company’s recent FY ending June 2018. Lumentum’s preannouncement notes that the company has “…recently received a request from one of our largest Industrial and Consumer customers for laser diodes for 3D sensing to materially reduce shipments to them during our fiscal second quarter for previously placed orders that were originally scheduled for delivery during the quarter.” We think investors could consider Lumentum’s updated guide as reflecting as much as a 30% cut in Apple orders.
So there’s that. And here’s this:
Big-cap tech is now on pace to underperform the S&P by an even wider margin in November than October, when the Nasdaq 100 logged its worst month since 2008.
So, if you’re looking for reasons why risk appetite seems to be in short supply to start the week, you could cite worries about demand for the most important consumer product on planet Earth.
Or you could believe the rantings of an unhinged septuagenarian tweeting from one of those very same products.
It’s up to you.