By KEN SWEET
NEW YORK — Stocks fell for a second straight day Tuesday as investors were left unimpressed by Apple’s (AAPL) latest batch of product announcements.
The Dow (^DJI) lost 97.55 points, or 0.6 percent, to 17,013.87, its biggest one-day drop in a month. The Standard Poor’s 500 index (^GPSC) lost 13.10 points, or 0.7 percent, to 1,988.44 and the Nasdaq composite (^IXIC) lost 40 points, or 0.9 percent, to 4,552.29.
Investors had little in the way of economic data to digest, so trading was largely dominated by the news out of Apple. The California-based tech titan announced an updated version of its iPhone, a smartwatch as well as payment system to compete with traditional debit and credit cards.
The iPhone 6 and its various iterations were well received by investors, as was the payment system, which would allow a shopper to purchase a product simply by holding his or her iPhone close to a sensor. Apple had been up as much as 4 percent after the products were unveiled.
The smartwatch left some investors scratching their heads, however, and the Apple rally quickly faded. The watch doesn’t come out until next year, costs $350, and would require an iPhone near it to work. It was hardly the new product category that investors had hoped it might be.
“I don’t know if they’re swimming up the right river with this watch,” said Dan Morgan, a senior portfolio manager at Synovus Trust Company, who has been a long-time investor in Apple shares. “It looks like an add-on product, not something that has the potential to be a phenomenon.”
At the end of the day, Apple fell 37 cents, or 0.4 percent, to $97.99.
Apple is often volatile on days it announces products. Yet while the decline in Apple’s own stock was modest, its product news had ripple effects in various parts of the market.
GPS device maker Garmin (GRMN) and watch company Fossil (FOSL) fell 3.5 percent and 2 percent, respectively. Both companies are looking to claim a stake in smartwatch industry, with Garmin heavily invested in watches used by athletes to track their performance. Fossil recently announced a partnership with Intel to develop smartwatches.
Investors saw Apple’s payment system as a direct competitor to eBay’s PayPal division, causing eBay to fall sharply in afternoon trading. EBay (EBAY) closed down $1.50, or 3 percent, to $52.73.
Other payment system companies, such as Alliance Data Systems, also took a beating. Google (GOOG), who is been trying to get into the mobile payment market as well as competes directly with Apple in phones, fell $8.71, or 2 percent, to $581.01.
Unrelated to the Apple announcement, the news out of Home Depot didn’t help the market either. Home Depot fell $1.89, or 2 percent, to $88.93 after the home improvement chain said hackers had broken into its in-store payment systems.
Home Depot’s problem follows a massive data breach at Target (TGT) nearly a year ago, raising concerns it is likely other major retailers could be targeted as well.
McDonald’s, another Dow member, fell $1.41, or 1.5 percent, to $91.09 after the company announced that global sales fell nearly 4 percent in August. In the U.S., typically a steady market for the fast food giant, sales fell nearly 3 percent.
Investors also had their eyes on the currency market.
The dollar extended its rally, hitting 106.20 yen, the highest since September 2008. Compared with other major currencies hurt by bad economic news in their home countries, the dollar appears attractive. The Federal Reserve is expected to end part of its stimulus program by October and is considering rate hikes, signs of greater confidence in the U.S. economic recovery.
If the dollar were to continue to rally, it may start to hurt U.S. corporate profits. A higher dollar makes U.S.-made products more expensive abroad, which makes them harder to sell compared with foreign-made goods. Investors don’t expect the dollar rally to continue over the long term, however.
“This could temporarily weigh on U.S. corporate profits, but U.S. companies generate so much business domestically that any impact would be modest,” said David Lebovitz, a global market strategist at J.P. Morgan Funds.
In other markets, bond prices fell slightly. The yield on the 10-year Treasury note rose to 2.50 percent.
The price of U.S. oil steadied after three days of steep drops. Benchmark U.S. crude rose 9 cents to close at $92.75 a barrel on the New York Mercantile Exchange.
Brent crude, a benchmark for international oils used by many U.S. refineries, fell sharply on further predictions of lower global demand. Brent fell $1.04 to close at $99.16 on the ICE Futures exchange in London, the lowest close since May 2013.
In metals trading, the price of gold fell $5.80 to $1,248.50 an ounce, silver fell four cents to $18.92 an ounce and copper fell seven cents to $3.10 a pound.
What to Watch Wednesday:
- The Commerce Department releases wholesale trade inventories for July at 10 a.m. Eastern time.
These major companies are scheduled to release quarterly financial statements:
- Restoration Hardware Holdings (RH)
- Men’s Wearhouse (MW)
- Five Below (FIVE)
- Lands’ End (LE)
- Vera Bradley (VRA)
When you get into that back office and start signing all the paperwork, the topic of extended warranties will come up pretty quickly. Ellie Kay, an author of 15 finance-related books, notes that such warranties are negotiable.
“Before you sign on the dotted line, check out other sources of extended warranty pricing,” she says, such as those provided by your bank or insurance company. “Then either use this lower price in the financial and insurance office for negotiation to get them to match the price, or buy it from the other source.”
A scenario from Kay during her last car purchase: “The dealer quoted me $4,200 for a three-year extended warranty for my 280SLK Roadster Mercedes that included a $250 deductible. USAA — my insurance company — gave me a three-year warranty for $3,200 with zero deductible. I’ve used the new warranty once already. The bill was $1,100 and I paid nothing because of the zero deductible.”
Bottom line: The default extended warranty is almost always the worst deal.
You may have a monthly payment figure in your head when shopping for a new car, but your interests are better served when you focus on the out-the-door price instead.
“A sales rep can often trick you by offering a lower monthly payment, but [one that] will stretch out the terms of the loan,” says David Bakke, a car buying expert at MoneyCrashers.com.
You can reduce the overall cost of the car via negotiation and by skipping accessories and add-ons. “Things like navigation systems, rims, floor mats or car audio/entertainment systems can be purchased from a third party vendor, usually for less.”
All our experts agree: Don’t even mention your preferred or maximum monthly payment price.
It may be tempting to just head to one local dealership, take a test drive or two, and walk out the door with a new car, but you’ll save yourself a lot more money by doing a little pre-shopping research.
“Once you have your choices narrowed down to a few makes or models, contact the Internet sales manager of a few dealerships,” suggests Bakke. “These folks can often offer better pricing than what you’d find dealing with an on-site sales person. Plus, you save time.”
In addition to, or in lieu of, e-shopping, Joshua Duvall of Capital Financial Services says to “find a few vehicles from different manufacturers and pit them against one another.” He explains that the car buying market is based on quantity and the fact that dealers want to move cars. “Force them to compete for your business.”
“Dealerships often employ hard-sell tactics that can be overwhelming for a first-time buyer, so it is a good idea to go with someone who has been through the process before,” explains John Ganotis, founder of CreditCardInsider.com.
Granotis also says that if you’re buying a used vehicle, it’s wise bring along a friend who knows his or her stuff when it comes to car health. For example, a mechanic who can peek under the hood, or recognize if something subtle is wrong during the test drive, would be especially handy.
OK, so sometimes ol’ Sally breaks down, and you need to get a new set of wheels, stat. If you don’t fall into that category, though, our experts recommend choosing your purchase date strategically, such as during a major sale. Better yet, wait for the end of a promotion.
Dealership salespeople often receive a bonus if they meet their targets during a promotion. Even if they lose money on a vehicle at the end of a promotion, they typically make up for the loss with their promotion target bonus.
Erin Konrad of CouponPal suggests buying near the end of the month. This is when salespeople are trying to meet monthly quotas and are more likely to negotiate.
Be familiar with common strategies employed by dealerships and sellers. For example, MSN Money warns against the “four-square” trick. (I’ve had this one used on me.) In this trick, the salesperson draws four boxes with a number in each: your old car’s trade-in value, the new car’s price, the down payment, and your monthly payment. “From there, the salesperson begins crunching numbers — most likely making it too hard for you to follow,” writes MSN. He or she will shift your focus to the monthly payment, which can result in a longer loan and a higher interest rate.
Another common trick is to heighten your sense of urgency, says Business Insider via Gregg Fidan, founder of RealCarTips.com and the author of “Honest Guide to Buying a Car.” For example, the dealer may tell you “that color is not available; there’s only three left statewide; the price is good only for today; someone else is interested in the car, better decide quickly, etc.” In this case, be patient and courteous, but remain level-headed and never rush to buy. Study up on Fidan’s list of 112 car-buying scams.
To sum up the list: Don’t let yourself get too caught up in the excitement of shiny metal, and remember that in six months that “new car excitement” will have faded, and you’ll be due for an oil change.