The Dow Jones Industrial Average (DJINDICES:^DJI) was down 2.1% at 11:35 a.m. EDT Friday, starting the month of May on a sour note. After an epic April rally that pushed the Dow up 11% for the month, the economic realities of the novel coronavirus pandemic may be putting renewed pressure on the stock market.
Apple (NASDAQ:AAPL) managed a small gain after reporting solid quarterly results, but the company warned that uncertainty prevented it from providing an outlook. Shares of Walmart (NYSE:WMT) were also up slightly after the retailer unveiled a new two-hour delivery service.
Apple grows revenue, offers no guidance
Services and wearables were the stars of Apple's fiscal second quarter. While iPhone revenue dropped 6.7%, Mac revenue fell 2.9%, and iPad revenue tumbled 14.8%, the tech giant was still able to eke out a revenue increase. Total revenue was $58.3 billion, up 0.5% year over year and nearly $3.7 billion higher than analysts were expecting.
Apple's wearables, home, and accessories segment, which includes the Apple Watch and AirPods, grew sales by 22.5% to $6.3 billion. Services revenue was $13.3 billion, up 16.6% from the prior-year period. Combined, those two segments grew strongly enough to offset weakness in Apple's core hardware business.
Apple also managed to grow the bottom line, at least on a per-share basis. Earnings per share came in at $2.55, up from $2.46 in the prior-year period and $0.29 higher than the average analyst estimate. Share buybacks were responsible for that growth -- operating income was down 4.2%, and net income was down 2.7%.
While the fiscal second quarter was better than expected for Apple, the company sees a lot of uncertainty ahead, prompting it not to issue guidance for the third quarter. "During the last three weeks of the quarter, as the virus spread globally and social distancing measures were put in place worldwide, including the closure of all our retail stores outside of greater China on March 13 and many channel partner points of sales around the world, we saw a downward pressure on demand particularly for iPhone and wearables," said CEO Tim Cook during the earnings call.
With the U.S. almost certainly in a recession due to the novel coronavirus pandemic, how demand for Apple's pricey gadgets will evolve over the coming months is unclear. Apple did recently launch the $399 iPhone SE, which could help drive upgrades even as consumers pull back on spending. But a steep decline in iPhone demand is possible, and perhaps likely.
Shares of Apple were up 0.15% by late morning, with the earnings beat not enough to drive anything more than a minor rally.
Walmart offers two-hour delivery
With the pandemic making shoppers skittish about visiting stores, Walmart announced a new service on Thursday that could be a big hit among those willing to pay a premium to have items delivered quickly. Walmart has been piloting its new Express Delivery service in 100 stores since mid-April, and it expects to expand the service to around 1,000 stores by early May and to a total of nearly 2,000 stores in the following weeks.
Express Delivery offers two-hour delivery from a Walmart store for a $10 fee on top of the existing delivery fee. Items are priced the same as in the store, and orders are delivered by Walmart's third-party delivery partners. The rollout of this service was accelerated due to the pandemic.
Walmart is scheduled to report its first-quarter results on May 19. While the numbers may be messy, especially as additional costs weigh on the bottom line, Walmart's e-commerce business likely experienced a surge in demand as shoppers avoided stores. While Express Delivery is a premium service, unlike Walmart's free online grocery pickup, it could still help further accelerate the company's e-commerce growth.
Shares of Walmart were up about 0.2% by late morning. The stock is just 9% below its 52-week high.