| Tuesday's Headlines 1. US stocks dragged down by Apple and semiconductors 2. Apple warns of revenue hit from coronavirus 3. Utilities and gold hit new highs as market concerns mount 4. HSBC tumbles on massive earnings miss Markets Closed
 Markets Today U.S. equity markets initially fell early on Tuesday due in part to concerns that Apple's business would be severely impacted by the spread of the coronavirus in China. This drop followed significant market losses in both Asian and European markets. Apple (AAPL) and U.S. stocks as a whole were able to claw back some of their initial losses by the close of U.S. markets, however, worries remain that the economic impact of the COVID-19 virus could be more severe than previously estimated.
As we discuss below, early Tuesday's rout in Apple's stock helped to pull down not only the benchmark S&P 500 large-cap index (of which the company is a major component), but also the semiconductor industry that supplies chips to the iPhone-maker. As AAPL, semiconductors, and the general market pulled back, investments perceived as "safer" hit new highs. This included both the defensive utility sector, which reached a new all-time high on Tuesday, and gold, which hit a high not seen since early 2013. Despite this apparent flight to safety, it remains to be seen whether a new "risk-off" market environment will follow. Headlines:
Apple Warns of Revenue Hit from Coronavirus Shares of Apple fell more than 3% at one point on Tuesday after the company issued a warning that revenue would take a significant hit due to the coronavirus outbreak. By market close on Tuesday, however, the stock pared some of those losses. Citing both declining demand for and slower-than-expected production of its products in China, the company stated that it does not expect to meet its quarterly revenue forecast of $63-67 billion. China represents both a major consumer market for Apple's products as well as a primary production hub for the iPhone. Apple's announcement underscored COVID-19's potentially wide-ranging global economic impact.
As one of the largest components of the S&P 500, Apple dragged down the market with its sharp drop early on Tuesday. More than that, though, the company's foreboding revenue announcement brought down semiconductor stocks, represented by VanEck Vectors Semiconductor ETF (SMH). These chipmakers, several of which supply critical components for the production of Apple's products, fell sharply. Most notably, Qorvo (QRVO), which derives a substantial portion of its revenue from Apple, fell around 2.6%. Overall, the SMH ETF fell 1.5% on Tuesday from the new all-time high it hit late last week. Safe Havens Surge as Market Concerns Mount As we've noted before, utility stocks are considered defensive, and often serve as "safe haven" investments for investors worried about the future of the stock market as a whole. Utility stocks typically show a consistent pattern of lower volatility, and are known for their predictable dividend yields. Therefore, when investors see storm clouds on the horizon, they often turn to the perceived safety and reliability of utility stocks over more risky sectors and investments. This could clearly be seen in the Utilities Select Sector SPDR Fund ETF (XLU), which shot up to hit a new record high early on Tuesday, even as the equity market overall pulled back.
Here's a one-year chart of XLU and its recent surge to progressively higher all-time highs.  Much like the utility sector, but even more so, gold is seen as a safe-haven asset. On Tuesday, as fears of the economic impact of the coronavirus intensified, gold prices surged to hit a new high above $1600, a price that hasn't been seen since early 2013. HSBC Tumbles on Massive Earnings Miss HSBC is Europe's largest bank with a major presence in Asia. On Tuesday, the banking behemoth reported earnings that fell far below analyst expectations. The bank reported $13.4 billion in pre-tax profit versus prior consensus forecasts of over $19 billion. This included a pre-tax loss of $3.65 billion for HSBC's European business. In addition, the bank announced that it will slash 35,000 jobs and that the fallout from the coronavirus epidemic will likely make a substantially negative impact on its extensive business in China.
Here's a one-year chart of the HSBC ADR, which fell more than 5% on Tuesday: 
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(chart courtesy YCHARTS)  Shares of asset manager Legg Mason jumped today after it announced that rival asset manager, Franklin Resources, was acquiring it. Franklin Resources was also up on the news. Research and engineering firm Leidos rose today after reporting better-than-expected earnings.  Engineering firm Fluor plummeted 24.3% today after it announced that its 10-K filing would be delayed, because the SEC is investigating its accounting practices. Westlake Chemical and Vulcan Materials both fell after announcing disappointing earnings. Word of the Day A safe haven is an investment that is expected to retain or increase in value during times of market turbulence. Safe havens are sought by investors to limit their exposure to losses in the event of market downturns. However, what appears to be a safe investment in one down market could be a disastrous investment in another down market, and so the evaluation of safe haven investments varies, and investors must perform ample due diligence.  Image Source: Venturelli/WireImage
Today in History February 18, 1898 Today in 1898 race car driver and businessman Enzo Ferrari was born in Modena, Italy. Ferrari became a race car driver for Alfa Romeo in 1920. He built a racing team which he called "Team Ferrari", and while he stopped driving in 1932, he continued to run his team until 1937. He shut down the team in 1937 to work for Alfa Romeo's race car manufacturing division, but left to start his own company in 1939. Due to a non-compete agreement Ferrari had signed, the cars built by his company weren't branded with the name "Ferrari" until 1947. While Ferrari started out only building cars for race car drivers, racer Luigi Chinetti convinced Ferrari to let him open the first ever Ferrari dealership in the early 1950's. In 1969, Enzo Ferrari sold a 50% share of his company to Fiat. Ferrari died in 1988 at the age of 90.
Source: https://www.businessinsider.com/ferraris-history-2016-2
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Tuesday, February 18, 2020
Mounting Worries
