The stock market did well last week, posting solid gains and building up some momentum to carry over the weekend. Futures contracts on major market indexes were volatile Monday morning, staying relatively close to unchanged but managing to post some very small gains in premarket trading.
Things weren't as fortunate for shareholders in a pair of individual stocks, however. Both Micron Technology (MU -0.87%) and Zim Integrated Shipping Services (ZIM -1.81%) had to deal with sizable losses on Monday morning. Below, you'll get the scoop on what sent these stocks lower and whether investors should have any long-term concerns about the respective businesses.
China snubs Micron
Shares of Micron Technology fell more than 4% in premarket trading on Monday morning. The move lower for the memory chip semiconductor stock came as tensions between the U.S. and China came to a head and prompted a direct move against Micron's business.
The Chinese government said over the weekend that it had completed a review of potential cybersecurity risks stemming from Micron's semiconductor products. According to the report from the Cyberspace Administration of China, Micron's components insufficiently protected against potentially serious problems, creating potential threats against China's national security. As a result, certain large companies in China will no longer be allowed to use Micron as a supplier.
The U.S. government responded with accusations that China's assertions lacked any factual support. Most industry analysts see the move as retaliation against steps that the U.S. has recently taken to control exports of Chinese-made semiconductor products.
The move lower was fairly large, especially considering that the ban only affects those Chinese companies making products that are critical for the country's information infrastructure. Much of Micron's business comes from companies focusing on consumer electronics, and those sales will apparently be allowed to continue. Nevertheless, some fear that the dispute between the U.S. and China will deepen, and that could potentially affect not only Micron, but also other semiconductor manufacturers.
Macroeconomic weakness hits Zim
Meanwhile, shares of Zim Integrated Shipping Services were down almost 9% early Monday morning. The global container shipping company announced first-quarter financial results that showed the extent of the macroeconomic slowdown worldwide.
Most of Zim's quarterly financial metrics looked weak. Revenue slumped 63% year over year to $1.37 billion, as the company had to deal with a 64% plunge in average freight rates. Shipping volume also struggled, falling 10% from year-ago levels to 769,000 units. All of Zim's profit from the previous year disappeared, leaving the company to post a loss of $58 million, or $0.50 per share.
CEO Eli Glickman noted that a retrenchment in the industry was inevitable following the record year of profit generation in 2022. Zim expects the environment for container shipping to remain challenging in the short run, particularly in trans-Pacific trade. However, the company said that the steps it took during good times last year set it up to face the current headwinds more effectively.
One area of particular interest is Zim's fleet upgrades, which include a rising number of dual-fuel liquefied natural gas vessels. This should not only improve Zim's cost structure, but also help it meet its goals with respect to ESG investing.
Despite the losses, Zim still expects to meet its past guidance for between $1.8 billion and $2.2 billion of adjusted pre-tax operating earnings, with $100 million to $500 million of adjusted pre-tax income after accounting for depreciation and amortization. Nevertheless, investors seem unconvinced that the worst is over for Zim, and that's pushing shares lower early Monday.
