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FirstFT: Apple and Amazon send shockwaves through Wall Street

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Apple and Amazon caused a sharp intake of breath on Wall Street last night as they warned that supply chain challenges and rising costs were having an impact on their businesses.

Executives at the iPhone maker said the company could sustain a hit of up to $8bn in the current quarter from the headwinds associated with supply chain shortages and factory shutdowns in China, a reminder for western companies that the coronavirus pandemic is far from over.

Apple’s shares reversed gains made in the aftermath of the release of the company’s latest quarterly results once executives began detailing some of the challenges that lie ahead.

“Covid is difficult to predict,” said Tim Cook, Apple chief executive, on a call with analysts last night.

The comments followed what was a near-record quarter for Apple. Revenues rose 9 per cent to $97.3bn in the first three months of the year compared with the same period a year ago. That was well above the $94.1bn analysts had predicted. Net profits jumped 6 per cent to $25bn, making it Apple’s third most profitable quarter on record despite it not being a holiday period.

But is was the comments from Cook and Luca Maestri, Apple’s finance chief, that weighed on the stock, which is down nearly 2.5 per cent in pre-market trading.

Amazon shares are also lower ahead of the final trading session of the week. The online retailer recorded a first-quarter net loss of $3.8bn which included a $7.6bn loss related to the value of its stake in electric vehicle maker Rivian.

It blamed overexpansion and a slowdown in sales for the plunge into the red and said it expected growth to slow this year as the company faced ongoing supply chain challenges and higher costs.

“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” said Andy Jassy, Amazon’s chief executive.

Amazon, which launched an unprecedented recruitment drive during the pandemic to help it cope with surging demand, said it was now overstaffed and had begun to cut positions.

Thanks for reading FirstFT Americas. Here’s the rest of today’s news — Gordon.

1. Elon Musk sells $4bn of Tesla stock The billionaire revealed after the market closed yesterday that he had sold almost 4.5mn Tesla shares at prices ranging from $872 to $999. The sale will boost the Tesla chief executive’s cash position ahead of his planned Twitter purchase.

2. Joe Biden asks Congress for more Ukraine aid The US president has asked Congress to provide $33bn in military, economic and humanitarian aid for Ukraine, in a sign Washington is preparing for a long and intensifying conflict. The request, likely to be approved by US lawmakers, is more than double the $13.6bn Biden requested last month and includes $5bn for weapons from American stockpiles. For the latest news on the conflict in Ukraine go to our live blog.

3. British Virgin Islands premier arrested on drug trafficking charges Andrew Fahie was arrested by US agents on drug trafficking and money laundering charges at a Miami airport yesterday, sending shockwaves across the UK-administered Caribbean tax haven.

4. Renminbi on course for steepest monthly fall China’s currency is set to close out its steepest monthly fall on record as the country’s economy reels from severe Covid-19 lockdowns and the prospect of higher US interest rates which are driving global investors to ditch Chinese assets. But a promise on Friday by China’s politburo to support the Covid-stricken country’s economy is helping support shares around the world today.

5. Erdogan’s embrace of Saudi crown prince signals end of dispute Turkish president Recep Tayyip Erdogan embraced the Saudi crown prince Mohammed bin Salman on a visit to Saudi Arabia, signalling the end of a years-long dispute between the two men over the murder of the journalist Jamal Khashoggi.

The days ahead

Corporate earnings It is the turn of oil majors ExxonMobil and Chevron to report first-quarter earnings today. Both companies are expected to have benefited from the rise in oil prices that followed Russia’s invasion of Ukraine. Other companies reporting include Honeywell, Bristol-Myers Squibb and Colgate-Palmolive.

Economic data The Federal Reserve’s preferred inflation gauge — the core personal consumption expenditures price index — probably rose 0.3 per cent in March, according to economists polled by Refinitiv, down from 0.4 per cent in February. Economists also estimate that the annual increase edged down to 5.3 per cent from 5.4 per cent in February. The closely watched University of Michigan’s consumer sentiment index also out.

Partial eclipse A partial solar eclipse will occur tomorrow over South America, Antarctica and the Pacific and Atlantic Oceans.

What else we’re reading

Bill Hwang case puts prosecutors’ market manipulation claim to the test The high-profile implosion of Archegos Capital Management caused billions of dollars of losses for investment banks and wiped more than $100bn from the valuations of nearly a dozen companies. But legal experts say prosecutors may still struggle to prove the manipulation charge. Stefania Palma spoke to some white collar crime lawyers about the case.

The return of the 20th century’s nuclear shadow Without most people being aware of it, the world is entering its most dangerous period since the 1962 Cuban missile crisis, writes Edward Luce. Putin has broken a post-Cuba taboo on threatening to go nuclear. The genie is out of the bottle and US military officials are planning for the worst, he says.

Hong Kong, my vanishing city Hong Kong’s population of 7.4mn is shrinking, fast. Draconian Covid regulations and a political crackdown by the authorities have led residents to flee the city. Author Louisa Lim, who now lives and works in Melbourne, pens a love letter to her former home.

The trap of the billable hour By defining each moment of their working lives as either “billable” or, regrettably, “non-billable”, lawyers are being tugged towards an unhappy attitude to the way they spent their time. Such thinking about all time as fungible is corrosive, writes Tim Harford.

‘Charlie probably knew far better than the rest of us that death was coming’ Charlie was 32 and had arguably just had the best year of his life when his almost twin sister and FT journalist Madison Marriage learnt of his death. Here Maddison tells the tragic story of her sudden and unexpected loss.

Reader feedback

Our inbox has been bulging this week with reader comments on Elon Musk’s agreed offer to buy Twitter for $44bn. Here are a few excerpts from FirstFT readers:

“Is it more dangerous to let people say what they want or silence them? If people are silenced, free thought is pushed underground. At least if people are able to freely express themselves, you will know who the truly crazy and dangerous ones really are,” says Andrew from California

“I think free speech is the foundation of America! That was what the founding fathers created our country on. It was not allowed in other parts of the world and it is still that way in many of the major economies,” Janice Powell, of West Monroe, Louisiana, writes.

“In a democratic environment all media should be and remain public with no controlling interest in the hands of anybody (hence with no shareholder agreements allowed either) and exclusively controlled by a diffused shareholder market,” says an anonymous reader.

We love to hear from our readers so please keep the comments coming. Have a good weekend and FirstFT will be back in your inbox on Monday — Gordon.

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