Weak Chinese Economy Hits the Stock Market Where It Hurts
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Call it the China syndrome.
Semiconductor chip-maker NVIDIA Corp. was the latest company to warn about waning demand in China for its products. The company cut its fourth quarter revenue guidance by nearly twenty percent today, citing weak demand in China as a major reason. It will report earnings on Feb. 14. The stock was down 13.87 percent -- the biggest drop on the Entrepreneur index today.
Dow index bellwether Caterpillar Inc. also sounded the China alarm this morning. The maker of heavy equipment missed earnings estimates by a wide margin, blaming weakness in China where it derives about a quarter of its sales.
Caterpillar shares were down 9.13 percent, helping drag the Dow index down 0.84 percent on the day. The S&P 500 and Nasdaq Composite indexes were down 0.78 percent and 1.11 percent respectively, while the Entrepreneur index declined 1.06 percent.
The signs of economic weakness in China continue to proliferate. The country’s National Bureau of Statistics announced today that the December profits of Chinese industrial companies fell by 1.9 percent versus the same month in 2017 -- the second consecutive month of declines. U.S. and Chinese trade negotiators have until Mar. 1 to strike a deal before new U.S. tariffs on Chinese goods take effect.
The worries about China, the second biggest consumer of oil in the world, also sent oil prices tumbling 2.79 percent. The stock of oil and gas producer Hess Corp, up 42 percent since Christmas Eve, fell 2.58 percent today.
NVIDIA’s dire warning dragged down other semiconductor stocks as well as the broader technology sector. Eleven of thirteen tech stocks on the Entrepreneur index were down with Twitter, (0.7 percent), and Verisign Inc. (0.08 percent) posting the only gains. Software-maker salesforce.com was down 1.62 percent and Cognizant Technology fell 1.57 percent. The four FAANG stocks on the index were all down, with Amazon.com, (-1.96 percent), falling the furthest.
Other significant declines on the Entrepreneur index included medical device-maker Boston Scientific Corp. (-1.6 percent), Alexion Pharmaceuticals, (-1.84 percent), Ford Motor Co. (-2.26 percent), truck-maker PACCAR Inc. (-2.22 percent) and homebuilder D.R. Horton Inc. (-2.44 percent).
Estee Lauder Companies, which beat analyst estimates last quarter and dismissed fears about a slowdown in China, was up 3.07 percent today -- the biggest gain on the Entrepreneur index. Asia is the fastest growing region for the cosmetics and skin-care company. It will report earnings next Monday.
Food-makers J.M. Smucker Company and Tyson Foods, widely viewed as defensive stocks were up 1.41 percent and 1.78 percent respectively. Victoria’s Secret lingerie-maker L Brands was up 1.56 percent. The real estate investment trusts on the index were also generally up on the day. Kimco Realty Corp. (1.92 percent), and Extra Space Storage, (1.74 percent), had the biggest gains in the sector.
The Entrepreneur Index™ collects the top 60 publicly traded companies founded and run by entrepreneurs. The entrepreneurial spirit is a valuable asset for any business, and this index recognizes its importance, no matter how much a company has grown. These inspirational businesses can be tracked in real time on Entrepreneur.com.