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US equity futures are pointing to a lower open pulled down in part by Apple (AAPL) and AMD (AMD) shares:
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Research firm Counterpoint finds Apple's (AAPL) iPhone sales in China fell 24% year-over-year in the first six weeks of 2024. The report found total China smartphone unit sales fell 7% YoY during the first six weeks of 2024. Counterpoint’s findings put Apple's share of the Chinese smartphone market at ~16% compared to 19% in the same period last year, while Huawei's market share increased to about 17% from around 9%.
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Apple’s manufacturing partner Foxconn Technology's (FXCOF) revenue in February fell 12.33% YoY and 32.5% MoM and the company continues to expect a year-on-year decline for the first quarter of 2024. According to the company, Cloud and Networking Products revenue showed year-over-year growth, while Component and Other Products' sales remained largely flat. For the first two months of 2024, Foxconn’s revenue was down 17.67% YoY. Foxconn is scheduled to report its fourth-quarter earnings on March 14.
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Reports indicate Advanced Micro Devices (AMD) hit a hurdle at the US Commerce Department in attempting to sell an artificial intelligence (AI) chip specifically for the Chinese market. Meanwhile, Nvidia (NVDA) is set to begin mass production of an AI chip it designed for China in the second quarter of 2024.
Ahead of tomorrow’s semiannual testimony by Fed Chair Powell, this morning’s post-market open release of the February US Service PMI reports from ISM and S&P Global are bound to attract attention. The key areas of focus will be familiar to readers of Daily Markets - the speed of the Services economy and inflation. Leading into those reports, the February Service PMI data published by HCOB found that the rate of increase in costs rose to not just a nine-month high, but well above the long-term average. Also setting the stage for today’s US Service PMI data were last week’s February Manufacturing PMI reports that both found “The rate of charge inflation accelerated for the third successive month as firms sought to pass through higher costs to customers.”
Should this morning’s February Service PMI reports echo those findings, the odds Fed Chair Powell will reiterate there is no rush to cut interest rates will move higher. Where things could get a little dicey will be if the Services sector data comes in substantially weaker than market forecasts. ISM’s headline reading February Services PMI is 53.0, down from 53.4 in January. So long as the Service sector remains firmly in growth territory with a reading well above 50.0, the odds of recession fears creeping into the current market narrative are low. However, should headline ISM’s figures surprise to the upside, it would be another reason for Powell to reiterate the slow road to rate cuts.
Helping investors put these puzzle pieces together ahead of Powell’s 10 AM ET testimony tomorrow, Fed Vice Chair for Supervision Michael Barr speaks at 12 PM ET today and again at 3:30 PM ET.
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