Stocks bounce back on US-China hopes; eyes on US jobs data

Apple lowers Q1 expectations, blaming shortfall on weak Chinese economy and trade war

In his letter, Cook blamed the earlier launch timing of the iPhone XS and XS Max compared to the iPhone X, the strength of the United States dollar, supply constraints due to the number of new products Apple released in the fall, and overall economic weakness in some markets.

Apple surprised Wall Street on Wednesday afternoon after the market closed by issuing revised guidance for its fourth quarter in a letter from CEO Tim Cook to investors.

Cook also acknowledged that consumers in other markets aren't buying as numerous latest iPhones, released last fall, as Apple had anticipated - a factor that could stem from a starting price of $1,000 for Apple's top-of-the-line iPhones. Some of the company's iPhones have passed the $1,000 mark while Chinese brands look to fill the mass market. Reports claimed the company cut orders by as much as 50 percent, especially for the iPhone XR whose sales are the worst impacted this year.

But the majority of Apple analysts are holding onto their bullish views despite problems seemingly coming from all corners.

Wall Street stocks have slid sharply in the wake of a warning from Apple (NasdaqGS: AAPL - news) that its revenues would fall short because of a slowdown in China.

And there was some very good non-iPhone news in Cook's letter.

"As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed", Cook said. When the suspension on selling was lifted, Apple shares fell 7.45%.

After Asian markets tumbled overnight and European exchanges stumbled, US futures were trading lower on Thursday morning, dragged down by Apple's stunning announcement Wednesday. "We did not foresee the magnitude of the economic deceleration".

Cook also said that the installed base Apple has grown by over 100 million units compared to this time previous year and revenues outside of iPhone grew 19 per cent. He added that overall, "consumption growth" is slowing down across China.

Business Insider reported that Apple quit disclosing its iPhone single unit sales that same quarter.

Shares of Apple suppliers plunged Thursday after the tech giant said revenue for the holiday quarter would be lower than anticipated.

"Our non-iPhone businesses have less exposure to emerging markets", he wrote.

Cook said the iPhone "accounts for all of our revenue shortfall", whereas other products in Apple's lineup such as the Mac and iPad are seeing strong growth.

Still, some local players managed to grow against the trend and they may be eating into Apple's market share.

Despite the slowing traffic, Apple's other categories grew over the period, with the company's wearables category growing by nearly 50 per cent due to the popularity of Apple Watch and AirPods.



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