Thursday, January 3, 2019
We begin this Thursday pre-market in the red again for major U.S. indexes, due to a slashing of revenue guidance for Apple’s (AAPL - Free Report) fiscal Q1 2019. Weaker iPhone sales projections in China have brought Apple’s top-line guidance down to only (“only”) $84 billion. The Zacks consensus prior to this news yesterday afternoon was roughly $91 billion. The new company guidance is also lower than the Q1 2018 top-line result.
So this has single-handedly put the Nasdaq’s nifty 5-day winning streak in peril, to say nothing of the Dow, of which Apple is its biggest component — and directly affects tech component suppliers, as well as several other tech firms indirectly. The Dow is trading down around 225 points from Wednesday’s close, Nasdaq is down 104 and the S&P 500 down 22.
Employment Data Widely Mixed
We see near polar-opposite headlines on U.S. employment this morning — a day ahead of the U.S. Bureau of Labor Statistics’ (BLS) non-farm payroll report due out tomorrow. Private-sector ADP’s (ADP - Free Report) private-sector payroll survey brought in 271K new jobs for the month of December, up nearly 100K from analysts’ expectations. On the other side of the coin, Initial Jobless Claims jumped out of its long-term low range to 231K new claims last week.
For the ADP numbers, Services well-outperformed Goods production, as per normal — 224K to 47K. That Services figure is actually quite high, accounting for a large section of today’s upward surprise. As per typical, Education/Healthcare led the way in terms of sector job gains, but its 61K number is well higher than normal these days and more than 20K higher than the second- and third-place sectors, Leisure/Hospitality (39K) and Construction (37K — also an atypically high figure).
Medium-sized firms (between 50-499 employees) produced the most new private-sector jobs last month, at 129K. Small businesses brought in 89K and Large companies brought up the slack. And a revision to the November ADP headline took it down 22K positions to 157K new jobs in that month. Finally, December numbers historically are subjected to near-term distortions that tend to get ironed out over time; temporary employment at retailers and goods distribution companies over the holiday shopping months are typically difficult to track.
We would expect tomorrow’s BLS headline — yes, BLS numbers will be forthcoming despite the nearly two-week-long government shutdown, although new Construction growth data has been delayed because of it — to bump up a bit, based on this morning’s ADP results. Currently, the non-farm payroll consensus sits at 176K, which is lower than the 12-month average of 200K+. That said, 2018 showed big fluctuations month over month regarding jobs data; we might expect something similar going forward.
Jobless claims rose 10K week over week to 231K, with the prior week having been revised higher by 5000 claims. This is still a very agreeable range with the overall employment scenario, and the prior range of 200-225K new jobless claims was not only reflective of an exemplary labor market, but probably not destined to go on forever. Also, we have seen weeks that push out of that low range only to go back into it in following weeks. And Continuing Claims of 1.74 million, while up week over week, is still an historically low figure, as well.
Big Pharma Buyout
Aside from these headline grabbers this morning, pharmaceutical major Bristol Myers (BMY - Free Report) is poised to buy cancer-treatment specialist Celgene (CELG - Free Report) for $102.43 per share, or $74 billion. The deal reportedly consists of $50 per share in cash and the rest BMY stock.
Normally when we see giant acquisitions like these, the buyer experiences an acute sell-off and the buyee sees its share price rise up toward the purchase price. That’s indeed the case this morning, with BMY shares down nearly 8.5% and CELG up a whopping 33.4%. More analysis on this to come.
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