Markets plunged Monday after coming under attack from multiple directions. Apple (AAPL) led the Nasdaq (-2.78%) lower after a key supplier of face recognition technology, Lumentum Holdings (LITE), told investors a key buyer had asked the company to “materially reduce shipments” of its products. Apple is notorious for demanding that its suppliers remain tight lipped about having Apple as a customer. This was followed by reports that President Trump is ready to play hardball and impose 25% tariffs on automobiles entering the U.S. Analysis of a possible trade deal with China at the G20 meeting later this month is also showing little hope of a compromise. On top of these two items, oil continued its bearish move, dropping another 2%, and the strong dollar continued to rise. The result of the combined news was a drop of more than 600 points on the DJIA, for a 2.32% loss, and a 1.97% trouncing of the S&P 500.
Tuesday investors are hoping for more positive news when Home Depot (HD) reports earnings. Expectations for the home improvement store are somewhat mixed as analysts weigh the negative impact of floundering new housing construction against the remodeling business, which may see an uptick as homeowners stay put. Also reporting Tuesday are Advance Auto Parts (AAP) and Tyson Foods (TSN). Analysts are expecting a record year from Tysons with earnings up over 22% this quarter. Strong results have been driven by Tyson’s beef and prepared food offerings.
The small business optimism index will be released Tuesday along with Redbook retail numbers. The NFIB index measures items such as plans to increase employment and plans to make additional capital outlays. The index is now expected to come in at 108. Wednesday investors will digest the weekly mortgage application numbers. Week-over-week applications are expected to drop 4% as rising interest rates continue to negatively impact both purchases and refis. Analysts will also get a look at CPI and Atlanta Fed business inflation expectations Wednesday. October CPI is expected to rise .3% after a .1% rise in September.
Cisco (CSCO) will lead the earnings charge on Wednesday. The network backbone company has been increasing earnings derived from a subscription model to boost revenue. The company also benefited from tax law changes which allowed it to repatriate $67 billion in 2018. Analysts will be looking for possible hints as to where the money, which hasn’t already been used for buybacks and dividends, will be spent. Continuing the tech theme, NetEase (NTES) and NetApp (NTAP) also report Wednesday, and rounding out the earnings calendar is Canopy Growth Corp. (CGC). The cannabis provider looks set to continue its rapid growth aided by recent investments from Constellation Brands (STZ). Analysts are expecting a near tripling of revenue from the company.
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