With the losses of the S&P 500, which is suffering a\nrecession for the first time since 2017, there are names of big companies\nworthy of blame.<\/p>\n\n\n\n
The financial results for the second quarter of the S&P\n500 calendar showed a decline for the second consecutive quarter, a trend\nreferred to as a slump in profits. Profits fell 0.35 per cent in the second\nquarter, based on companies that were in the index at the end of the previous\nearnings season after a 0.29 per cent decline in the first quarter.<\/p>\n\n\n\n
An analysis of the fact-finding data shows that five large\ncompanies were the largest contributors to the first-half recession: Apple\n(AAPL), Boeing (BA), Exxon Mobil Corp. (XOM) Facebook Inc. and Micron\nTechnology. The reasons for the decline in profits of each company vary, which\nmeans that this recession cannot be blamed on the sector itself.<\/p>\n\n\n\n
Boeing suffered a severe loss in the second quarter because\nof the safety of its 737 aircraft, following two fatal crashes. In addition to\nthe financial blow to the decommissioned aircraft, the company announced that\nit would incur higher production costs. Boeing eventually reported a net loss\nof $3.3 billion in the second quarter after making 1.9 billion in profit a year\nearlier, making it the biggest contributor to the decline in the second quarter\nthis year.<\/p>\n\n\n\n
Weakness in oil prices and business lines helped drive Exxon\nMobil’s second-quarter profit down, a trend in which the company expects to\nreport its third-quarter report. Exxon reported a 34 percent drop in overall\nrevenue.<\/p>\n\n\n\n
While Exxon’s revenue decline was not the largest in the\nenergy sector, the market weighting of the S&P 500 means that its results\nhave a significant impact on the overall earnings performance of the index. For\nexample, Noble Energy (NBL) suffered a 158 per cent drop in revenue in the\nsecond quarter, but its result had a relatively minor impact on the S&P 500\nearnings. Of course, Exxon is almost 30 times larger than Noble.<\/p>\n\n\n\n
Apple has a similar problem. While it was not the worst\nperformer in terms of profits in the hardware sector, due to the company’s huge\ngross profit means that a 16.4% profit decline in the first quarter of the year\nwas the largest contributor to the decline in that period. Apple’s profits fell\n14.7 percent in the first half of the calendar year as its strategy to sell the\nmost expensive smartphones ever faced mounting pressure in the latest iPhone\nrelease, which was compounded by geopolitical tensions with China.<\/p>\n\n\n\n
Facebook and Micron earnings statements confirm other\nproblems experienced by major technology companies. Facebook received a $5\nbillion fine in the first half of the year after settling with the Federal\nTrade Commission. The social media company is also facing the issue of spending\nmore in order to enhance the safety and security of its platform, as this has\nbecome an increasingly real problem for the big players in the world of social\nmedia.<\/p>\n\n\n\n
Micron’s earnings remained under pressure after the high\ncost of memory chips rose in 2018 and sharply boosted Micron’s profit the\nprevious year. However, Micron’s profits fell by more than 50% in each of the\nfirst two quarters of the year, and have already pushed the S&P 500 in the\nsecond and half quarters for the third consecutive quarter of declines.<\/p>\n\n\n\n
Analysts expect earnings to fall sharply until the third\nquarter. Facebook is the only one of the top five shareholders expected to post\na third-quarter profit increase. The overall profit of the current components\nof the S&P 500 is expected to decline by 4.88%.<\/p>\n\n\n\n
While the S&P 500 has fallen this year, share prices\nhave not fallen. The S&P 500 has soared 18.5% so far in 2019, while the\nfive companies contributing to the recession have also risen so far this year,\nstarting with a 1.5% increase in Exxon to 49.5% for Apple.<\/p>\n","protected":false},"excerpt":{"rendered":"
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