Stock market indexes lost ground in the first half of Monday's session as China protests weighed on broad sentiment. Apple iPhone Pro production could fall short by 6 million units due to civil unrest and Covid restrictions.
The Dow Jones Industrial Average and S&P 500 fell 0.8% into the lunch hour while the Nasdaq composite lost 0.9%. The Russell 2000 small-cap index led the downside, retreating 1%.
Volume on the Nasdaq and the NYSE surged higher; not hard to do compared to Friday's half-day session.
Fed Chair Jerome Powell speaks Wednesday at the Brookings Institute, ahead of the Fed's "quiet period" leading into the mid-December meeting. Market-moving comments are unlikely at this venue but he could reiterate a slower rate path.
The 10-year Treasury note yield was flat at 3.69%.
Crude oil fell to a 52-week low before bouncing into the green. It traded at $76.75 per barrel, shaking off worries about China-driven demand destruction. OPEC+ meets next weekend to discuss production levels.
Asian and European markets lost ground in quiet action, with many bourses down around 1%.
Bitcoin stumbled overnight and tested the $16,000 level once again. Coinbase hovered less than three points above last week's all-time low of 40.61.
Apple Production Could Miss Mark
Apple fell 2% into the lunch hour. Bloomberg reported that unrest at the Foxconn plant in Zhengzhou could trigger a 6-million-unit shortfall in 2022 iPhone Pro production. And that number could grow if Covid restrictions are extended a few more weeks, according to sources.
Earlier this month, the tech icon cut its annual production target from 90 million to 87 million units. The Zhengzhou factory manufactures the vast majority of iPhone 14 Pro and Pro Max smartphones.
AAPL stock struggled to hold the 50-day moving average after a two-week test and could sell off into horizontal support in the mid-130s. Apple performance compared to the S&P 500 has been declining since September.
Big Trouble In China
Western media outlets reported continued protests in China overnight, triggered by the Communist Party's draconian zero-Covid policies. The demonstrations and lockdowns are bad for the world economy because China's vast consumer population fuels growth.
Social media cheered on the protesters but many are old enough to remember the Tiananmen Square massacre in 1989. The Chinese government has a brutal history when it comes to dissent.
Ironically, Macao awarded long-delayed licenses to American casino operators at the same time, lifting Wynn Resorts 2.5% and Las Vegas Sands 0.3%.
Both stocks topped out in 2018 and are in long consolidations after mid-pandemic bounces failed in the first half of 2021.
Jobs, Homes, Retail Sales Top Stock Market Catalysts
No major economic releases are scheduled for Monday as stock market participants shake off the holiday spirit. However, we are getting early snapshots of holiday retail performance.
Just keep in mind that retail industry groups invariably spin early data in a positive light so its best to read with a skeptical eye.
Home sales and price data later this week should confirm continued retrenchment in the housing market due to high interest rates. A second reading on third-quarter GDP Wednesday morning could reveal surprising growth.
The same may hold true with Friday's nonfarm payrolls report. Many companies have announced major layoffs but pink slips could wait until January so targeted workers can enjoy their holidays.
Holiday Sales Rise
Black Friday brick and mortar sales rose 2.9%, according to retail analytics provider Sensormatic Solutions. Online shoppers didn't wait for Cyber Monday sales, lifting e-commerce receipts to $9.12 billion, up 2.3% compared to 2021. But these numbers may not yield strong profits for retailers due to heavy discounting and higher unit costs, driven by inflation.
Buy-now, pay-later orders rose 78% last week while revenue from those transactions soared 81%. This phenomenon highlights growing economic stress in American households.
"As Black Friday hit record spending online, we're also seeing more prominent signs of a budget-conscious consumer this year," Vivek Pandya, lead analyst at Adobe Digital Insights, said. "Shoppers are embracing the Buy Now Pay Later payment method more this year to be able to buy desired gifts for family and friends."
The National Retail Federation expects 2022 holiday sales to rise between 6% and 8%. While better than the 4.9% 10-year average, its far worse than 2021's record-breaking 13.5% surge, fueled by optimism as the pandemic wanes.
Cheap Stocks To Buy And Watch: 5 To Observe Right Now
Stock Market Movers And Shakers
Salesforce heads this week's stock market earnings calendar, with the Dow Jones component expected to report a profit of $1.22 per share on $7.83 billion in revenue in Wednesday's post-market session.
CRM stock has suffered like the rest of the tech universe this year, with growth stalling after a nearly endless upward trajectory. It is grossly underperforming the S&P 500, with a miserable 27 Relative Strength Rating. Worse yet, earnings are forecast to shrink in 2023, marking the second straight year of declining profits.
In a painfully ironic act, the Dow Jones committee made room for Salesforce in August 2020 by removing Pfizer, less than three months before the pharma giant stunned the world with research on its Covid-19 vaccine.
Salesforce shares traded higher by 0.3% in the first half of Monday's session.
Solar play and IBD 50 component Shoals Technologies Group fell into the buy zone, dropping 5.2% in the second week after a breakout above the 28.57 buy point of a stage 1 consolidation.
SHLS stock carved a high-volume breakaway gap on Nov. 15, adding nearly 22%.
Follow Alan Farley on Twitter at @msttrader.
