Stocks sold off Thursday after weak U.S. manufacturing data reinforced worries about slowing economic growth. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) opened lower, appeared to be attempting a rebound around midday, but fell in the afternoon to close near their lows for the session.
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Technology shares were hammered, with the Technology Select Sector SPDR ETF (NYSEMKT:XLK) losing 5.1%. Gold has been rising since mid-November as investors seek safe havens; the VanEck Vectors Junior Gold Miners ETF (NYSEMKT:GDXJ) gained 3.7%.
Apple hit by disappointing iPhone sales
Shares of Apple plummeted 10% after the company issued a downward revision of its guidance for its fiscal first quarter due to weakness in Chinese iPhone sales and slower iPhone upgrades in developed markets. In a rare cut to previously issued sales guidance, Apple said it expects revenue in the quarter that ended Dec. 29 to be $84 billion, which is 7.7% below the midpoint of its forecast two months ago.
The new forecast represents a revenue decline of 4.9% from Q1 of last year. Apple attributed the unexpected shortfall totally to iPhone sales, saying that revenue outside of iPhone grew by almost 19% and revenue from its services business increased 27.5%.
Hurting the broader market were statements that fueled concerns of an economic slowdown in China, with CEO Tim Cook commenting, "[W]e did not foresee the magnitude of the economic deceleration, particularly in Greater China." Hints that the Chinese consumer is being affected by rising trade tensions cast a pall on the overall market today.
Bristol-Myers Squibb aims to snap up Celgene
Bristol-Myers Squibb kicked off 2019 by announcing a massive acquisition, offering $74 billion in combined cash and stock for Celgene in order to become a giant in cancer treatments. Investors were skeptical, sending shares of Bristol-Myers Squibb down 13.3%.
Bristol-Myers will pay $50 in cash plus a share of its stock for each share of Celgene. Additionally, Celgene shareholders will get a tradable Contingent Value Right for each Celgene share, which will entitle the holder to a payment of $9 upon FDA approval of three Celgene drugs. Based on closing prices yesterday, the deal values Celgene stock at $102.43, a 54% premium.
The merged company will be the No. 1 biopharma company in oncology and cardiovascular drugs and in the top five in immunology and inflammation. The deal should kick-start Bristol-Myers' growth, with the acquisition expected to create a 40% boost in earnings per share and $2.5 billion in cost savings by 2022. The combined company will have nine blockbuster drugs and near-term drug launches representing $15 billion in revenue opportunity.
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Jim Crumly owns shares of Apple and CELG. The Motley Fool owns shares of and recommends Apple and CELG. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.