Stocks opened sharply lower after Apple (AAPL) pre-announced last night that it sees a revenue shortfall in the current quarter, due mainly to weakness in China. Shares of Apple traded down as much as 10% and had a large ripple effect across the major averages. The market, which was moving off its lows in early trading, received another blow when the ISM data for December showed the biggest drop since 2008. That put the sellers in control through most of the morning, leaving the Dow down roughly 2% near noon with the Nasdaq and S&P similarly deep in the red.
ECONOMIC EVENTS: In the U.S., ADP reported private payrolls climbed 271,000 in December, which was much stronger than the 180,000 expected. Initial jobless claims jumped 10,000 to 231,000 in the week ended December 29, which was a bigger gain in first-time claims than forecast. The ISM manufacturing index dropped 5.2 points to 54.1 in December, hitting a 2-year low. For context, the index had hit a 14-year high of 61.4 in August.
COMPANY NEWS: Shares of Apple (AAPL) are down 8% near noon, which is improved from the stock's worst levels, after the iPhone maker reduced its revenue guidance for the December quarter largely due to weaker than anticipated sales in Greater China due to macroeconomic factors, including trade tensions with the U.S. In reaction, Wall Street analysts lowered their Apple targets and at least two downgraded the stock, including Loop Capital's Ananda Baruah and Jefferies' Timothy O'Shea. Baruah cut Apple to Hold from Buy and lowered his price target to $160 from $225, saying the pre-announcement "greatly reduces the visibility" of the company's revenue trajectory in the medium term and puts its valuation into question. O'Shea also downgraded Apple to Hold and cut his target for the shares to $160, stating that Apple's business in China appears to be "rapidly deteriorating" with last night's revised outlook for the iPhone "materially worse" than expected.
In M&A news, Bristol-Myers Squibb (BMY) announced an agreement to acquire Celgene (CELG) for $74B in cash and stock, representing a 54% premium from yesterday's close. Based on the closing price of Bristol-Myers stock of $52.43 on January 2, the cash and stock consideration to be received by Celgene shareholders at closing is valued at $102.43 per Celgene share and one Contingent Value Right that will entitle the holder to receive a payment for the achievement of future regulatory milestones. Following the deal announcement, Celgene shares have surged 25%, while Bristol shares have plunged 13% near midday.
Shares of General Motors (GM) dropped in morning trading after the company said its fourth quarter U.S. auto sales fell 2.7% from a year ago. Ford, which reported its own U.S. sales were down 8.8% in December, also said it will be moving to a quarterly sales release, with its next sales release planned to be in April.
MAJOR MOVERS: Among the noteworthy gainers was Corbus Pharmaceuticals (CRBP), which rose 6% after it announced a collaboration pact with Kaken to commercialize Lenabasum in Japan.
Also higher was Teva (TEVA), which gained 5% after BofA Merrill Lynch analyst Jason Gerberry upgraded the stock two notches to Buy from Underperform with a price target of $20.
Among the notable losers was Lumber Liquidators (LL), which declined 4% after Loop Capital analyst Laura Champine downgraded the stock to Hold and cut her price target for the shares to $10 from $24.
Also lower were a number of Apple suppliers, including Skyworks (SWKS), which fell 9%, Qorvo (QRVO), which dropped 9%, and Broadcom (AVGO), which is down 6%.
INDEXES: Near midday,
the Dow was down 437.04, or 1.87%, to 22,909.20, the Nasdaq was down 122.08, or 1.83%, to 6,543.86, and the S&P 500 was down 36.78, or 1.47%, to 2,473.25.