Market Update: Apple’s Mixed Guidance Drags U.S. Stocks Lower; Wage Growth Reaches Nine-Year High

U.S. stocks turned lower on Friday, snapping a three-day winning streak as investors grew critical of Apple’s mixed holiday guidance and decision to stop reporting iPhone sales. Nonfarm payrolls surprised to the upside in October, with hourly wages rising above the elusive 3% mark for the first time since 2009.

Stocks Finish Lower

After a strong open, Wall Street’s major indexes booked heavy losses in afternoon trade. The large-cap S&P 500 Index fell 0.6% to 2,723.06, with eight of 11 primary sectors finishing lower. Shares of information technology companies were the biggest drag on growth, falling 2% as a sector. Healthcare and communication services were also big laggards.

A lackluster performance in technology weighed on the Nasdaq Composite Index, which fell 1% to 7,357.00.

Meanwhile, the Dow Jones Industrial Average declined 110.59 points, or 0.4%, to 25,270.15. Dow industrials were briefly down more than 300 points earlier in the day.

Apple’s Mixed Guidance

Shares of Apple Inc. (AAPL) plunged on Friday following a mixed earnings call that underscored the iPhone maker’s significant growth but cast doubt over its future. The Cupertino, California-based company late Thursday reported per-share earnings of $2.91 on revenue of $62.9 billion. Analysts in a median forecast called for an EPS of $2.78 on revenue of $61.4 billion.

However, Apple not only sold significantly fewer iPhones than expected, it announced it will no longer be providing unit-sales figures for its flagship smartphone and other products. Some analysts have described this as a ‘Houdini-like move’ that suggests the company has something to hide.

It didn’t take long for Bank of America Merrill Lynch to downgrade Apple’s stock to neutral, with analyst Wamsi Mohan citing concerns over slower app revenue growth, a slowdown in emerging markets and mixed reaction from investors regarding guidance. The analyst also downgraded Apple’s 12-month price target to $220 from $235.

Apple shares were down 6.6% by the close.

U.S. Wage Growth Accelerates

The U.S. labor market shifted into higher gear last month, with employers adding far more workers than expected.

Nonfarm payrolls grew by 250,000 in October following a downwardly revised gain of 118,000 in September, the Labor Department reported Friday. Analysts had called for an increase of 190,000. The unemployment was steady at 3.1%, the lowest in five decades.

Average hourly earnings, a proxy for wage inflation, jumped 3.1% in the 12 months through October, the highest since 2009. A razor thin jobless rate combined with higher wages is a strong signal that the economy has exceeded full employment.

One area still lagging is labor force participation, which increased 0.2 percentage point to 62.9% in October but remains low by historical standards. People drop out of the workforce for various reasons, including several failed attempts to land jobs.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi