Earnings Season: Will China Cut into Revenues?
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York.
How did Apple’s China warning trigger concern on Wall Street?
Apple sent a shiver down Wall Street's spine when it reeled in earnings projections because of economic struggles in China. Well, who's going to join Apple in making such an announcement? We'll have more in a moment. First, these money and market stories you should know. We often tell you what the big names on Wall Street are saying about the economy, but a survey taken earlier this month gives voice to the individual investor. A survey by E-Trade Financial shows that more than half of respondents say they're pessimistic about the stock market in 2019, with trade issues with China being the biggest factor in their thinking. Other investors listed Federal Reserve monetary policy at gridlock in Washington as painting a bleak picture for the markets in 2019.
But long term, individual investors are more upbeat and say they'll buy any significant dips in the market. And the Wall Street Journal Real Estate Bureau points out that many homeowners who bought property on golf courses are seeing those values diminish dramatically as golf courses around the country close. In fact, the National Golf Foundation says more than 200 golf courses closed in 2017 around the country, while only about 15 new ones opened. More broadly, in 2005, there were more than 16,000 golf courses in the U.S. In 2017, there were fewer than 15,000. And when a course closes, prices for nearby homes typically fall about 25%.
If it's been unclear what impact China's slowing economy has had on U.S. corporations, things are likely to come more into focus when quarterly earnings begin coming out this week. Wall Street Journal reporter Inti Pacheco is here with details. So Inti, Apple unsettled Wall Street earlier this month when it said that China's downturn contributed to it lowering sales projections, and additional companies are likely to do the same.
We talked to analysts and economists and they were seeing Apple as a very specific case. It actually depends on each of the companies to see what's going to happen to them, whether they're going to have to cut their revenue forecasts like Apple did or if they're going to do fine because they've been planning for this because the economic slowdown in China actually started with the manufacturing sector back in late 2017.
What do individual investors say about trade tensions and the 2019 market?
And retail sales in China in November slowed down to their lowest level in 15 months. Is that right?
Correct. Yeah. But as I said, basically, the slowdown started in late 2017 with the manufacturing sector and it snowballed into the rest of the economy. So companies have been able to say, we're not going to sell as much as we're expecting and maybe change that in their quarterly reports. It's not really as a price.
Yeah.
Okay, and one thing that companies I'm sure have their eye on is that what's compounding the problem, the potential problem for U.S. companies is they tend to target wealthier consumers in China, and that sector has been most impacted by the economic downturn.
What some economists were saying is that if you look at the iPhone, it's a $1,000 product. But other companies that are selling products that are within the $300 to $500 range are are not seeing the same problem. That's the case, for example, with Nike, who sells shoes for, what, $100 to $150. It's easier for a consumer to get that, and it's not as easy for them to purchase something that is $700 to $1,000.
Yeah, you use Nike as an example in your story, also Starbucks, and trying to illustrate how a company deals with competition in China in addition to just simply, it's not just simply the income of the consumers that work here, but it's also the competition that they would face.
Totally. That's one of the things that everyone is pointing out as a major factor in the reason why Apple had to slash their revenue forecast. And that is because, for example, you have the option of Huawei, who produces phones that are cheaper and that do basically the same as an iPhone can do. So, yeah, domestic markets.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
How did Apple’s China warning trigger concern on Wall Street?
0:09–2:28
3
What do individual investors say about trade tensions and the 2019 market?
2:28–5:47
4
How is China’s slowdown affecting U.S. real estate and golf-course communities?
5:47–6:36
Speakers
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