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Even America’s biggest company can’t save itself from a global shortage of crucial computer chips.
What’s happening: Apple (AAPL) just had a massive quarter thanks to sales of new iPhones, iPads and MacBooks, with revenue nearly hitting $90 billion. Sales of iPhones reached nearly $48 billion, a 65% increase over the same quarter last year, as consumers continued shelling out the big bucks to upgrade to Apple (AAPL)’s first 5G smartphone lineup.
But that wave of demand is now coming up against major supply chain issues resulting from the pandemic. In a call with analysts, Apple Chief Financial Officer Luca Maestri said that the company expects revenue will be $3 billion to $4 billion lower this quarter thanks to “supply constraints.”
That includes problems procuring chips, which are expected to affect the production of iPad and Macs.
“We’ll have some challenges in there, and challenges in meeting the demand that we’ve got,” CEO Tim Cook said on the call. Apple shares are still up nearly 3% in premarket trading.
Remember: Carmakers were among the first to sound the alarm about a shortage of microchips, which forced companies including General Motors (GM), Hyundai (HYMTF), Ford (F) and Fiat Chrysler (FCAU) to temporarily shut down plants.
On Wednesday, Ford warned that the chip shortage will get worse before it gets better, and will likely cut 2021 profits by about $2.5 billion.
Now, even top tech companies are dealing with the fallout.
Samsung (SSNLF) told analysts on its earnings call Thursday that it’s working hard to rebalance production to reduce shortages of semiconductors and other key parts, which could weigh on sales of products like smartphones.
Big picture: While the pain has spread from autos to consumer electronics, it won’t stop there. In a research note published last week, Goldman Sachs said that 169 US industries embed semiconductors in their products. The bank said its “working assumption” is that there will be a 20% average shortfall of computer chips for those affected.
The problem isn’t going away anytime soon.
“Because of the proprietary technologies, specialized machinery, and economics of scale needed to produce any given type of computer chip or component — and because many of the mature facilities are already operating near full capacity — the imbalance is likely to persist into the fall and possibly into 2022,” the bank’s analysts wrote.
Investor insight: Wall Street is tracking how shortages could hurt corporate earnings, but it’s also trying to puzzle out what they mean for inflation, which is being closely monitored by central banks. A reduction in supply, as fewer cars and tablets are produced, could contribute to higher prices.
Goldman Sachs thinks the price of affected products could rise by 0.7% to 3% this year, providing a “temporary” boost to inflation readings.
Biden at 100 days: Hottest stock market since JFK
The Biden bust that the Trump campaign warned of has morphed into a Biden boom, my CNN Business colleague Matt Egan reports.
See here: The S&P 500 is up 8.6% since the market close on Jan. 20, the final day of the Trump presidency. That means President Joe Biden is on track for the strongest stock market performance during a new president’s first 100 days since John F. Kennedy in 1961, according to CFRA Research.
The Biden rally squeaks past the 8.4% jump during the first 100 days of the Obama presidency and is well above the 5% increase in the months following former President Donald Trump’s inauguration.
Friday will mark Biden’s 100th full day in office, not counting Inauguration Day.
Presidents tend to get more credit — and more blame — than they deserve when it comes to the stock market’s performance. Still, the historic gains at the start of the Biden era add to a sense of optimism about America’s recovery from a once-in-a-century pandemic.
“If the stock market is any indication, Wall Street appears to approve of President Biden’s attempts to corral the Covid-19 crisis and stimulate the economy,” Sam Stovall, CFRA’s chief investment strategist, told CNN Business.
Remember: The US stock market recovered from the pandemic long before the election, boosted by unprecedented support from the Federal Reserve and Congress. Markets gathered momentum last fall as election chaos scenarios were avoided. Wall Street, like Main Street, cheered vaccine breakthrough announcements in November that helped fuel the Dow’s best month since January 1987.
Stocks have continued to rally in 2021 as the rapid rollout of vaccines raises hopes for an economic boom.
History suggests the stock market has a good chance of finishing the year in the green. Since 1932, only once did the S&P 500 end the year in the red after rising during the first 100 days of a presidential term, according to Randy Frederick, vice president of trading and derivatives at Charles Schwab.
But that will require investors to continue to shrug off concerns about the virus, inflation and higher taxes. In a speech before a joint session of Congress on Wednesday, Biden reiterated his intention to raise taxes on the wealthy to pay for trillions of dollars in fresh spending on infrastructure and education.
“It’s time for corporate America and the wealthiest 1% of Americans to pay their fair share,” he said.
The Declaration of Independence is going public
A copy of the Declaration of Independence will hit the sizzling collectibles market just in time for the Fourth of July — and unlike other rare items up for sale, you don’t have to be a millionaire to own a piece of it.
Rally, a trading app for classic cars, baseball cards and other memorabilia, will next month offer 80,000 shares to the public of a copy of the Declaration of Independence printed in July 1776.
The item is one of just 20 copies from that period that are in private hands. It was previously displayed at the National Constitution Center in Philadelphia. Each share will cost just $25, making it a $2 million initial public offering.
The IPO comes during a surge of interest in collectibles, with everything from art to sneakers to sports cards skyrocketing in value. A LeBron James rookie card sold for a record $5.2 million earlier this week. And the explosion of digital certificates for art and collectibles known as non-fungible tokens, or NFTs, has been grabbing headlines.
The rush has been triggered in part by central bank policy, which Federal Reserve Chair Jerome Powell indicated Wednesday was not changing any time soon. With interest rates at rock bottom, investors are looking for ever more creative places to park their cash.
“People are trying to get protection from the debasement of their dollars,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “They want to be in things with limited supply and that have the perception of value in the eyes of many.”
Altria (MO), Carlyle Group (CG), Caterpillar (CAT), Comcast (CCZ), Domino’s Pizza (DMPZF), Hershey Foods (HSY), Kraft Heinz (KHC), Mastercard (MA), McDonald’s (MCD), Merck (MKGAF) and Molson Coors (TAP) report results before US markets open. Amazon (AMZN), Twitter (TWTR) and US Steel (X) follow after the close.
Also today: The first look at US gross domestic product for the first three months of the year posts at 8:30 a.m. ET, along with initial unemployment claims for last week.