What we covered here
- Markets: US stocks close lower.
- Blue Apron plunged more than 10% today to a new all-time low of 64 cents a share.
- Sprint soared after getting FCC’s endorsement for T-Mobile deal.
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What’s moving markets today: May 20,2019
Updates
(17)Tesla stock drops amid safety concerns
Tesla’s stock slid Monday after an analyst at Wedbush Securities raised concerns about its ability to meet production goals and amid fresh worries over the safety of Autopilot, the company’s semi-autonomous driving feature.
Shares fell nearly 3% to $205.36 on Monday. On Sunday evening Wedbush’s Dan Ives cut his price target for Tesla, writing: “[With] a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound.”
Tesla’s stock has now dropped about 11% since Thursday, when the National Transportation Safety Board reported that Tesla’s Autopilot was activated during a fatal crash involving a Model 3 in March.
There have been multiple crashes involving Autopilot.
The NTSB’s report raises further questions about Tesla’s marketing of the driver-assistance software. Critics are concerned that using the term “autopilot” to describe a car that isn’t fully self-driving can give drivers a false sense of security.
CEO Elon Musk said last month that the company plans to have more than 1 million full self-driving Teslas on roads next year.
US markets close lower; Nasdaq falls 1.5%
US markets all closed lower today, weighed down by the US blacklist on Huawei and fears about the tech sector.
Apple (AAPL) was the biggest loser in the Dow, falling 3% after a Wall Street analyst lowered his price target and argued that investors should be more concerned that higher tariffs on goods produced in China could make already expensive iPhones even pricier in the United States.
Dow components Intel (INTC) and Nike (NKE) also suffered, dropping more than 2% each.
Meal kit service Blue Apron (APRN) closed near an all-time low, ending the day at 69 cents per share. The company announced a proposal for a reverse stock split.
Blue Apron sinks to new all-time low of 64¢
Blue Apron (APRN) plunged more than 10% Monday to a new all-time low of 64 cents a share after announcing a proposal for a reverse stock split. That’s when a company reduces the share count to push the price higher – usually to remain in compliance with the exchange they trade on. In this case, it’s the New York Stock Exchange.
Blue Apron said it hopes a reverse split will “improve the marketability and liquidity” of the shares and “encourage interest and trading in the stock.” That may be a stretch. The value of the company would remain the same. Reverse splits are often viewed as a sign of desperation.
Shares have plunged nearly 95% since their initial public offering in June 2017. The company has faced brutal competition and has continued to rack up losses – despite partnerships with Walmart-owned (WMT) Jet.com and WW (WTW).
So unless shareholders approve the reverse stock split, a delisting from the NYSE may be the next ingredient on Blue Apron’s menu.
Dish Network shares sink 10% after EchoStar deal
Dish Network (DISH) shares sank 10% after it announced it was buying part of satellite-owner EchoStar for $800 million.
EchoStar (SATS) operates the satellites used for Dish’s TV service and Dish is its only customer for satellites. The sale would help EchoStar eliminate the “risk associated with providing services to a solitary customer,” it said in a statement.
Another issue for Dish is the potential Sprint (S) and T-Mobile (TMUS) merger, which is also weighing on the stock, per our Paul R. La Monica:
Markets move lower at midday
US markets are moving slightly lower at midday:
The technology sector is being weighed down by the US ban on Huawei and bearish analyst notes. Apple (AAPL) and Tesla (TSLA) are down more than 3% and Intel (INTC) slid 2%.
The Dow’s top gainer is Verizon (VZ), which is up 2%, following the FCC chairman’s endorsement of the Sprint and T-Mobile merger. AT&T (T), WarnerMedia’s parent company, is also up 1.6%.
Xiaomi's plan to sell more phones in India and Europe is paying off
Smartphone maker Xiaomi’s investments in global growth are paying off.
The tech company said Monday that smartphone sales in the first three months of the year jumped 16% despite a drop in shipments in China, its home market.
Big picture: China is the world’s biggest smartphone market, but sales there have been slipping. That led Xiaomi to make a big push in India — where it’s gone from nowhere to No. 1 in five years — and Western Europe.
The result: Overall revenue from international markets grew by 35% in the first quarter of the year. The company said it’s going to keep opening stores abroad, and is now eyeing expansion in Latin America and Africa.
Not giving up: Xiaomi can’t abandon China, where it still makes 62% of its revenue. The company said it expects Beijing’s efforts to stimulate the economy will help smartphone sales bounce back.
Apple analyst warns of more China problems
One of the most bearish analysts who covers Apple believes even more bad news lies ahead. Apple’s (AAPL) stock tumbled 3% Monday after HSBC’s Erwan Rambourg lowered his price target on the iPhone maker to $174 a share. That’s 5% below the current price and among the lowest targets for Apple on Wall Street.
Rambourg, who has a “reduce” rating (essentially a “sell”) on Apple, argues that investors should be more concerned about higher tariffs on goods produced in China making already expensive iPhones even pricier in the United States. He also believes Chinese consumers may increasingly shun Apple in favor of phones made by homegrown tech firms like Huawei and Xiaomi.
Despite these worries, Apple’s stock is still up about 16% this year, making it one of the best performers in the Dow. Investors seem to approve of CEO Tim Cook’s push to make Apple more of a services company. But Rambourg thinks that faith may be misplaced.
Luckin Coffee slips on its second trading day
Luckin Coffee (LK), Starbuck’s big rival in China, closed 20% higher on its first day of trading.
How’s the second day going? Not so hot, according to our Paul R. La Monica:
Trade war fallout: Dow slides 200 points, Nasdaq tumbles almost 2%
Fears about the US-China trade war rattled Wall Street today, prompting investors to dump tech stocks like Apple.
Tech stocks fell sharply as investors fret over the fallout of the Trump administration’s crackdown on Chinese tech giant Huawei.
Chip makers Qualcomm (QCOM), Micron (MU), Advanced Micro Devices (AMD) fell 3% or more. The VanEck Vectors Semiconductor ETF (SMH) slumped.
Apple (AAPL), which relies on China for a chunk of its sales, lost 4%.
Sprint (S) surged 24% after FCC Chairman Ajit Pai announced his support for the Sprint/T-Mobile merger. To win FCC approval, Sprint has agreed to unload its Boost Mobile prepaid business.
T-Mobile (TMUS) shares jumped 5%. The deal still requires antitrust approval from the US Justice Department.
Ford will lay off 7,000 white-collar workers
Ford (F) is cutting 7,000 white-collar jobs, or about 10% of its salaried staff worldwide, as part of a cost-cutting effort it says will save the company about $600 million a year.
The company says workers will begin to be notified of cuts starting Tuesday, and the terminations will be completed by the end of August. About 2,400 of the jobs cuts are in North America, and 1,500 of the positions were eliminated through a voluntary buyout offer.
Sprint soars 25% after FCC chairman backs T-Mobile deal
The planned merger between Sprint and T-Mobile is reportedly moving forward because the Federal Communications Commission chairman is ready to clear his part of the $26 billion deal if the companies make changes.
“In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it,” FCC chairman Ajit Pai said, according to Reuters.
The news sent both of the stocks soaring: Sprint (S) is up 25% and T-Mobile (TMUS) is up 7% in early trading.
The Department of Justice still needs to approve the merger. Antitrust officials are concerned about the impact it will have on competition in the wireless industry.
The deal was initially announced in April 2018.
Deutsche Bank shares just hit an all-time low
Shares of Germany’s biggest bank hit a record low in European trading on Monday, piling more pressure on management ahead of the company’s annual shareholder meeting later this week.
Deutsche Bank shares dropped almost 3% after UBS changed its rating of the company’s stock to “sell” from “neutral.” Shares are down almost 40% in the past year.
The thinking: Deutsche Bank’s revenues are shrinking and “remain under pressure,” UBS said. It doesn’t expect any big strategic moves soon.
Up next: CEO Christian Sewing has faced calls to articulate a new plan for the struggling bank after a potential merger with Commerzbank fell apart last month. There could be fireworks if he fails to do so at the annual meeting on Thursday.
What else: The New York Times reported that Deutsche Bank anti-money laundering specialists once recommended that transactions involving entities controlled by President Donald Trump and his son-in-law, Jared Kushner, be reported to a US agency that investigates financial crimes. The Times said executives at Deutsche Bank rejected the advice of their specialists.
- CNN Business could not immediately verify any of the claims.
- Deutsche Bank told CNN Business: “At no time was an investigator prevented from escalating activity identified as potentially suspicious.”
Chip stocks are getting clobbered
It appears it’s going to be another tough week for chipmakers, partly prompted by rising trade tensions with China and the United States’ blacklist on Huawei technology.
Bloomberg reported late Sunday that Intel (INTC), Qualcomm (QCOM) and Broadcom (AVGO) will stop working with the Chinese tech firm. Google (GOOGL) also announced reduced ties with Huawei.
Qualcomm is off more than 3% in premarket trading. Other chip makers, including Analog Devices (ADI), Xilinx (XLNX) and Micron Technology (MU) are the biggest S&P 500 losers, all declining more than 3.8%.
Tesla is 'facing a quagmire,' analyst warns
Tesla (TSLA) shares are sinking more than 4% in premarket trading after Wedbush Securities analyst Daniel Ives warned that he has “major concerns” about CEO Elon Musk and the company.
Here’s what Ives said in a new note:
He said that Tesla is “facing a quagmire” because it’s doing several things at once, such as building a new factory in China, developing the next Model Y and continuing to ramp up production of the Model 3, all while “facing a growing cash crunch and high expense structure issue.”
He lowered the stock’s price target from $275 per share to $230 because of “reduced confidence in the company’s ability to hit its 2019 unit demand guidance.”
Tesla closed at $211.03 per share on Friday. The stock is down 37% for the year.
Google dumps Huawei
Google (GOOG) is cutting back on its business with Huawei following an order from the Trump administration barring American companies from selling to the Chinese tech firm without a US government license.
Huawei relies on Google’s Android operating system for its devices, as well as the Google Play app store.
The restrictions deal a huge blow to Huawei’s ambitions to overtake Samsung (SSNLF) as the world’s biggest smartphone maker. Huawei phones are much less attractive outside China without Google services, according to analysts.
The news is likely to feed investor unease about the US-China trade war as negotiations between Washington and Beijing appear to stall.
Traders will continue to keep a close eye on the yuan, which was little changed Monday.
The currency’s steep slide against the dollar in recent weeks could complicate talks further.
Checking in on global markets
US stock futures point slightly lower after concluding last week on a disappointing note.
The Dow closed down 0.4% on Friday. The S&P 500 fell 0.6%, and the Nasdaq lost 1%.
- 🌍This morning, the Dow is set to fall more than 30 points when US markets open, or 0.1%. The S&P 500 is on track for a similar percentage drop, while the Nasdaq could shed 0.5%.
- 🌍European markets opened lower. Britain’s FTSE 100 index dipped about 0.4%. France’s CAC 40 index fell 0.9%, while Germany’s DAX index dropped 0.6% in early trading. Trade anxiety continues to weigh on stocks globally.
- 🌏That follows a mixed trading session in Asia, where Hong Kong’s Hang Seng index dropped 0.6% and the Shanghai Composite index shed 0.4%. Meanwhile, Japan’s Nikkei index climbed 0.2%.
- 🇮🇳Stocks in India jumped more than 3.8% after exit polls indicated that incumbent Prime Minister Narendra Modi could be on track for a second term.
Federal Reserve chair Jerome Powell gives keynote speech
Federal Reserve chair Jerome Powell will give the keynote speech at the Atlanta Fed’s Financial Markets Conference on Monday at 7 p.m. ET.
Powell said at the beginning of the month that board members didn’t see a “strong case” for either raising or lowering interest rates. But that was before new rounds of tit-for-tat tariffs from Washington and Beijing.
The Trump administration has also said it’s preparing further tariffs on Chinese goods worth $300 billion, which would put duties on essentially all of the country’s exports to the United States.
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