By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- Apple Inc.'s near 4% drop wiped out
$17 billion from the U.S. stock market on Monday, pushing two of
the three benchmark indexes into negative territory.
Shares of Apple (AAPL) fell $18.55, or 3.6%, at $501.75 after
The Wall Street Journal and Japan's Nikkei reported that the
company had cut iPhone production plans because sales had come in
below expectations.
The S&P 500 Index (SPX) shed 1.37 points, or less than 0.1%,
at 1,470.68, with telecommunications hardest hit and consumer
staples faring best among its 10 industry groups.
"It would be positive without" Apple, said Howard Silverblatt,
senior index analyst at the S&P Indices, of the stock's impact
on the index of 500 public companies. Take out Apple and the index
would have ended Monday's session in the green, or up 0.04%, he
added.
The Dow Jones Industrial Average (DJI) rose 18.89 points, or
0.1%, to 13,507.32, with Hewlett-Packard Co. (HPQ) leading the
gains after J.P. Morgan upgraded the personal-computer maker to
neutral from underweight. H-P also reclaimed the top PC-maker
ranking from Lenovo Group Ltd.
International Business Machines Corp. (IBM) dropped 0.9% after
J.P. Morgan downgraded it to neutral from overweight.
Shares of Dell Inc. (DELL) rallied 13% after Bloomberg News
reported that the company was in buyout talks with private-equity
firms.
Sprint Nextel Corp. (US-S) dropped 3.9% after the stock was
downgraded by some brokerage firms.
The Nasdaq Composite Index (RIXF) lost 8.13 points, or 0.3%, to
3,117.50.
Apple has a significant impact on the major stock indexes. It
has a 3.8% weight in the S&P 500 and a 10% weight in the
Nasdaq, and is the largest stock on both; it's not a Dow
component.
"In terms of the general negative sentiment, it's a combination
of Apple and a bit of poor industrial production number out of
Europe. That was a pretty ugly wake-up call," said Bill Stone,
chief investment strategist at PNC Wealth Management. Industrial
output for the 17-nation euro zone dropped 0.3% in November.
Decliners and advancers ran in a virtual dead heat on the New
York Stock Exchange, where 590 million shares traded. Composite
volume approached 3 billion.
"As the week wears on, we'll have a much more robust earnings
calendar. Of those 27 S&P 500 companies reporting so far,
they've lowered estimates significantly in the last three months,"
said Art Hogan, market strategist at Lazard Capital Markets.
Companies reporting so far have managed to "squeeze out some
sort of beat of lowered expectations," said PNC's Stone.
Of the first 27 companies in the S&P 500 to report
fourth-quarter results, 67% exceeded earnings-per-share growth
expectations, 15% were in line and 18% missed, according to Nick
Raich, director of research at Key Private Bank. Of those
companies, which represent 5% of the 500 that will eventually
report, 11% raised their first-quarter 2013 guidance; 19%
maintained and 70% lowered their outlooks.
"The new consensus expectation for fourth-quarter 2012 earnings
growth is only 2%," added Raich. "The guidance companies are
providing after reporting results is still very weak."
In Washington, President Barack Obama talked about efforts to
reduce the U.S. deficit at a Monday news conference in which he
urged lawmakers not to use the debt ceiling as leverage in the
political wrangling over government spending.
With a battle looming with Congress in the weeks ahead over
hiking the $16.4 trillion debt ceiling, Republican lawmakers are
considering a government shutdown or default as a way to force cuts
in government spending.
In separate statements, Senate Republican leader Mitch McConnell
called the debt-ceiling debate the "perfect time" to confront
government spending, and House Speaker John Boehner also indicated
his intention to link spending cuts to hiking the debt ceiling.
The Treasury market did not signal distress over the danger of a
government default, with yields on the benchmark 10-year note
(10_YEAR) off 1 basis point, or 0.01 percentage point, to
1.85%.
Federal Reserve Chairman Ben Bernanke spoke at 4 p.m. Eastern in
Michigan, following comments delivered by Chicago Fed President
Charles Evans that the central bank should continue to keep
monetary policy accommodative as lawmakers cut U.S. spending.
"The market will be watching Bernanke to get a better take on
when the Fed might start to take the punch bowl away," said Stone
of the Fed's monetary policy.
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