Shares of the world’s largest technology company have slumped 17% this year, weighed down by a broad selloff in tech, driven by rising interest rates and inflation that promises to force consumers to cut back on spending.
The vote of confidence from Warren Buffett, who touted Apple as a good bet in an inflationary environment because of the ease at which it can raise prices, hasn’t seemed to give the company much of a boost. And while the stock hasn’t performed well, the business seems to be all right, with some analysts predicting that June quarter earnings will exceed expectations.
It’s almost as if investors are still looking for reasons to sell tech stocks.
despite beating second-quarter estimates, was poised to fall on Tuesday.
which reports after the bell, has already dropped more than 70% this year, despite analysts arguing that subscriber growth will recover in the longer term.
To be fair, Apple is still outperforming the
which has declined almost 30% this year. But if the best of the bunch of higher-risk tech stocks now sees some headwinds ahead, maybe everyone needs to batten down the hatches.
*** Join Barron’s associate editor for technology Eric J. Savitz today at noon for a pre-earnings look at internet stocks with Ryan Jacob, CEO of the Jacob Internet Fund. Sign up here.
Apple, IBM Highlighted as Big Tech Earnings Kick Off
Apple is slowing hiring and spending growth in 2023 in an effort to be cautious in uncertain times, Bloomberg reported, news enough to send stocks tumbling into the red on Monday. But IBM earnings after the closing bell added a more hopeful outlook for tech earnings this week.
- IBM’s second-quarter revenue and profit per share beat forecasts, and the company said it continues to see positive results from its recent refocus on software and services tied to artificial intelligence and hybrid cloud computing.
- A new product cycle for its mainframe hardware business should help support growth for at least the next few quarters. IBM expects September quarter results to face a currency headwind, however, and mainframe sales are likely to slow from the second quarter (but increase from last year).
- IBM reiterated its forecast for full-year revenue at the high-end of its revenue target of mid-single-digit growth. The free cash flow outlook for $10 billion reflects the suspension of operations in Russia, rising costs, and foreign exchange effects.
The report about slower hiring at Apple follows similar news at
and job cuts at Netflix and
What’s Next: Netflix reports after the closing bell tonight. As usual, subscriber numbers will be the focus, especially after the streaming giant surprised investors by losing 200,000 net subscribers in the first quarter. Expect to hear more about an ad-supported subscription offering in the works.
—Liz Moyer and Eric J. Savitz
Boeing Gets Big Order From Delta Amid Travel Surge
Delta Air Lines
ordered 100 new 737 Max 10 planes from
with options to buy 30 more later, though the plane hasn’t been approved by aviation regulators yet. Boeing now has orders for about 740 of the Max 10s, as this year’s Farnborough Airshow just outside London continues.
- Delta’s order would cost about $13.5 billion at current list prices. Delta CEO Ed Bastian said the carrier was trying to shape a sustainable future, with an elevated customer experience and improved fuel efficiency.
- Boeing commercial airplanes chief Stan Deal said it would resume deliveries of the 787 Dreamliner jet, halted since early 2021 after manufacturing issues. Qatar Airways CEO Akbar Al Baker said his airline was still interested in Boeing’s twin-aisle 777X, which is also still awaiting regulatory approval.
- Airlines are getting their summer travel rebound but are also grappling with the chaos of long lines, lost baggage, and a shortage of baggage handlers, security agents, and air-traffic controllers. More than 925 U.S. flights were canceled and 5,700 were delayed on Monday, according to FlightAware.com.
- Although passenger volumes are approaching prepandemic levels, airline staff levels are lagging behind. Swissport International, an aviation services and baggage handler at many airports, is hiring for 17,000 jobs and offering $5,000 sign-on bonuses at some U.S. airports, The Wall Street Journal reported.
What’s Next: Airlines that downsized during the pandemic are now waiting for pilots and flight attendants to complete their training and background checks. U.S. airlines have hired more pilots this year than in any other full year, according to FAPA.aero, a pilot-career advisory company, the Journal reported.
—Al Root and Janet H. Cho
Berkshire Tops Up Stake in Occidental to Near 20%
continues to add its stake in
and now holds 19.4% of the energy company after new purchases totaling more than $100 million this past Thursday and Friday, according to a filing late Monday.
- Berkshire Hathaway bought 1.9 million shares of Occidental Petroleum late last week at prices ranging from $56 to $59 a share and now holds 181.7 million shares worth about $11 billion, according to its filing with the Securities and Exchange Commission.
- CEO Warren Buffett has been steadily adding to Berkshire’s stake in Occidental since the position was first disclosed in March. Berkshire has rarely paid more than $60 a share for Occidental stock, and Barron’s calculates that Berkshire’s cost for the vast bulk of its stake is around $54-a-share.
- Oil prices were little changed early Tuesday, after jumping more than 5% at the start of the week as traders took advantage of a decline in the dollar to snap up futures. Brent crude, the international benchmark, was at $106.29-a-barrel. West Texas Intermediate, the U.S. standard, was at $102.75.
What’s Next: Berkshire seems headed toward a 20% stake in Occidental that would allow it to include a proportionate share of the energy company’s earnings in its financial results rather than just dividends received. That could boost Berkshire’s earnings by about $2 billion annually.
—Andrew Bary and Brian Swint
Home Builders’ Confidence Index Tumbles on Falling Demand
The National Association of Home Builders’ monthly confidence index tumbled 12 points in July, the second-largest decline in the index’s history and much lower than economists’ forecasts. The index, now 55, was 80 a year ago, MarketWatch reported.
- “Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” said NAHB chairman Jerry Konter, a builder from Savannah, Ga.
- Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote that home builders have been in denial about falling demand, and expects the index to fall further.
- The average interest rate on a 30-year fixed mortgage climbed to 5.51% for the week ending July 14, according to Freddie Mac. Mortgage applications fell 1.7% for the week ending July 8, and the average loan amount fell to $415,000, from $460,000 in March.
- Foreign purchases of U.S. houses declined 7.9% from last year, the fifth straight annual decline, because of international travel restrictions and the stronger dollar. But the dollar volume of homes purchased increased 8.5% to $59 billion, reflecting higher prices, the National Association of Realtors said.
What’s Next: NAR chief economist Lawrence Yun expects foreign investment in U.S. real estate to increase because supplies of available homes are rising. Nonresidents are more likely to buy U.S. homes as rental properties or vacation homes and to pay in cash.
—Janet H. Cho
Omicron Subvariant Dominates as U.S. Cases Climb 18%
The highly contagious BA. 5 subvariant of Omicron remains the cause of the majority of Covid-19 infections in the U.S., where average daily cases are up 18.2% over the past two weeks, and hospitalizations and deaths are also increasing, The Wall Street Journal’s analysis found.
- The University of California Irvine reinstated its indoor mask mandate, following UCLA and other California universities, the Los Angeles Times reported. Los Angeles County is considering bringing back its mask mandate in July.
- Parents in Florida are having difficulty finding the Covid-19 vaccines that were authorized for children 6 months to 5 years. Gov. Ron DeSantis is taking criticism for not preordering shots and for prohibiting county health clinics from administering them, the Washington Post reported.
- The U.K. will expand eligibility for second boosters to people aged 50 and older, and others at higher risk, starting this fall. Macau extended its lockdown on casinos, restaurants, and other businesses through Friday and told residents to stay home, the Associated Press reported.
are developing boosters to target the latest dominant Omicron variant. Pfizer has a deal to sell the booster to the government for $30.48 a dose. Moderna is thought to be holding out for a higher amount, Barron’sreported.
What’s Next: Dr. Anthony Fauci, 81, director of the National Institute of Allergy and Infectious Diseases and chief medical advisor to President Joe Biden, said he plans to retire by the end of Biden’s first term, calling it “extremely unlikely” he would stay after January 2025.
—Janet H. Cho
Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.
Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.
Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and, at the end of the challenge, the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.
Are you ready to compete? Join the challenge and pick your stocks here.
—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Rupert Steiner