When U.S. stocks posted their worst December since the Great Depression, traders put plenty of the blame on actions by the Federal Reserve and that other favorite scapegoat, computerized trading.
But it now seems clear that the market was mostly anticipating what has actually happened in recent days: companies are cutting profit forecasts and trying to temper expectations for earnings growth this year after a big 2018
On the first day of trading in 2019 last week, Apple warned that its fiscal first-quarter sales wouldn't be as high as previously projected and said its profit margin would be ever so slightly narrower than forecast. The Nikkei Asian Review reported this week that Apple is cutting its iPhone production by 10 percent for the next three months.
Interest rate hikes by the Fed have contributed to weaker demand for mortgages and home purchases, but there are other reasons for the late-2018 market decline.
For the fourth quarter, which for many companies ends in December, 72 S&P 500 companies have issued earnings warnings, twice as many as have issued positive guidance, according to FactSet. Earnings growth rates have been revised lower by companies in all 11 S&P sectors.
And analysts are now looking for single-digit earnings growth for the next three quarters of this year. While fourth-quarter 2018 earnings growth is projected to be 11.4 percent, the first-quarter projection is for 2.9 percent growth, then 3.7 percent in the second quarter and 4.3 percent in the third.
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