The 2 companies sinking Wall Street

The 2 companies sinking Wall Street

When companies cite China as problematic regarding their earnings, investors realize China-related issues are going to spread, said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.

Shares of the company, considered an economic bellwether, tumbled 10 per cent Monday, the worst sell-off in more than seven years.

The major US equity indexes took a hit on Monday, driven lower by weaker-than-expected quarterly earnings, guidance and revenue from two bellwether USA corporations that highlighted the negative impact the ongoing trade dispute between the United States and China was having on China's slowing economy.

While the company acknowledged a slowdown in China, the broad-based growth helped it top Wall Street's expectations for both sales and profit in the fourth quarter. Caterpillar fell 7.8 per cent to $126.12.

Analysts say there might be moves to trim China's massive trade surplus with the USA that could stave off further hikes in punitive tariffs imposed by both sides.

In July-September, China's economy expanded at 6.5 per cent, the slowest pace since the financial crisis.

USA stocks tumbled yesterday after warnings from Caterpillar Inc and Nvidia Corp added to concerns about a slowing Chinese economy and tariffs taking a bite out of U.S. corporate profits.

As signs of a slowdown in the world's second-largest economy become stark, investors are pinning their hopes for a compromise between Washington and Beijing on trade when officials meet tomorrow and Thursday.

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Shares of Caterpillar Inc and Nvidia Corp sank after the two manufacturers joined a growing list of companies warning about the crippling effects of the fall-off in growth in the world's most populous country.

"The construction firm's disappointing fourth-quarter results was an terrible way to kick off a hugely important period for company updates, and translated to a woeful start for the Dow Jones, which swiftly shed around 350 points".

Rising material costs, partly due to tariffs, and higher freight expense increased the company's manufacturing costs more than it had expected, said executives on the conference call.

In the fourth quarter, Caterpillar's revenue increased across all of its regional businesses, with the largest rise in North America, its biggest market by value.

Apple CEO Tim Cook said in a letter to shareholders this month that demand for iPhones is waning and revenue for the last quarter of 2018 will fall well below projections, a decrease he traced mainly to China.

Tech giants Microsoft and Apple were also weighed down by China concerns.

Last year, the construction equipment company lost $1.3 billion in the quarter, or $2.18 per share, but at that time it was dragged down by an enormous charge related to tax reform. General Electric Co., for example, has traditionally excluded these costs from its adjusted earnings per share, despite the fact that the company has seemingly been in a perpetual restructuring mode for the past few years with little to show for it in terms of profit gains.

Caterpillar Inc., based in Deerfield, Illinois, anticipates 2019 earnings in a range of $11.75 to $12.75, roughly in line with expectations.

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