February 17

Apple Warns

Commentary: Coming into Monday futures were up modestly as markets in Europe seemed to be taking their cue from China’s strong performance. Government leaders indicate they will do whatever it takes to support the economy considering the pandemic that has swept the nation.

At 4PM Monday Apple warned that they won’t be able to make guidance in the March quarter saying iPhone supply to be constrained. Not a lot of detail in the release and probably indicates that management doesn’t yet have a handle on how big the problem is. Until they can get workers back in the factories and fully re-open their stores 2020 guidance will be a question as well.

We’ll see how this plays out in the night session for futures and markets tomorrow, but I would think some of this news would be baked into expectations given how long factories and stores have been offline. Expect other companies to follow with similar commentary especially the supply chain dependent on Apple’s (AAPL) production schedule.

The earning’s season is close to over as most of the big names have reported. Earnings grew modestly for large cap but down for stocks in the Russell 2000. The mixed picture needs to change. Its unlikely multiple expansion can carry us sustainably higher for the remainder of the year. A year ago, estimates for the S&P were $186 and today the 2020 estimate is $175.

We have a fair amount of economic data this week including Empire State Manufacturing, Housing, PPI, Philly Fed and of course the FOMC minutes. Most of the morning focus will be on Apple’s warning. I suspect tomorrow will be one of those days where how we close is a lot more important than how the market opens.

*At the time of this post some funds managed by David were long AAPL