Dow slides almost 400 points as Caterpillar and Nvidia reinforce slowdown fears

Jeannie Matthews
January 31, 2019

Asian machinery stocks may move after Caterpillar reported its biggest quarterly profit miss since at least the beginning of 2008: Komatsu, Hitachi Construction Machinery, Doosan Heavy Industries & Construction, Doosan Infracore, Kobe Steel, Kubota, Tadano, Takeuchi Manufacturing, Seven Group Holdings, Zoomlion Heavy Industry, Sany Heavy Industry, Sany Heavy Equipment, Sumec Corporation, CTCI Corporation, Guangxi Liugong Machinery and XCMG Construction Machinery Co. Vale shares dropped 22.6 percent in Sao Paulo trade.

Meanwhile, the stock of computer game company Nvidia dropped 13.82 per cent, after it downgraded its earnings from $2.7 billion to $2.2 billion on the back of the slowing Chinese economy.

The stock fell 6 percent to $128.71 in premarket trading.

The market fell further after chip company Nvidia warned that sales would be weaker than expected, because of a slowdown in China.

Samsung Electronics Co's quarterly profit and revenue missed estimates on sputtering demand for memory chips during the last three months of past year, the same period Apple saw anemic sales in China. The Dow Jones Industrial Average. was down 1.2 percent.

The Philadelphia semiconductor index fell 2.1%, while the S&P technology index dropped 1.8%.

The beginning of the week started with investors displaying a weak sentiment towards the futures market as the U.S Stock Index Futures shows a downward trend.

"With the Chinese economy struggling the way it is and with companies feeling the impact, the U.S.is also starting to realise that there is enough motivation to get a deal done". The market believes this to a direct outcome of the US-China trade war, which has been going on for the past few months. The Stoxx Europe 600 Index declined 0.4 per cent, the biggest drop in two weeks.The MSCI Asia Pacific Index decreased 0.2 per cent.

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Volatility has picked up as investors fret about an economic cycle that is long in the tooth, leading to sharp reactions in the market to news, said Laura Kane, head of investment themes for the Americas at UBS Wealth Management.

Weakness in China is problematic for Caterpillar.

US crude settled down 3.17 percent at $51.99 per barrel and Brent fell 2.77 percent to settle at $59.93.

The company expects volatile oil prices to hurt its energy and transportation business this year.

USA crude production, which rose to a record 11.9 million barrels per day late a year ago, has undermined sentiment in the oil market, traders said.

The dollar slipped to 109.36 Japanese yen from 109.64 yen late Friday.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.74 percent.

China accounted for between 5% and 10% of its total sales and 10% to 15% of its construction unit's revenue, Caterpillar Chief Financial Officer Andrew Bonfield said during the company's last earnings conference call in October.

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