Apple warning of weak sales in China sends US stocks sinking

The Dow Jones Industrial Average fell more than 600 points about an hour into trading

Stocks went into a steep slide Thursday morning after Apple reported a slowdown in iPhone sales over the holidays in China, a hugely important market for the company.

The rare warning from Apple sent a shudder through markets and confirmed fears among investors that the world’s second-largest economy was weakening.

The Dow Jones Industrial Average fell more than 600 points about an hour into trading.

Apple’s stock plunged 10 per cent, erasing $67 billion in value. Other big exporters including technology and machinery companies also took big losses.

Some of the worst drops went to chipmakers that make components used in smartphones and other gadgets. The trade dispute, nearly a year old, threatens to snarl their supply lines and reduce demand for their products. Tariffs and other trade sanctions could add to their difficulties.

The losses deepened after a survey of U.S. manufacturers also showed signs of weakness. The benchmark S&P 500 index was down 2.4 per cent as of 10:45 a.m.

In a letter to shareholders on Wednesday, Apple CEO Tim Cook said iPhone demand was waning in China and would hurt revenue for the October-December quarter. Cook said Apple expects revenue of $84 billion for the quarter. That’s $7 billion less than analysts expected, according to FactSet.

Apple’s warning, its first since 2002, deepened concerns about the Chinese economy, which had been showing signs of stress.

The S&P 500 dropped 60 points to 2,449. The Dow slid 642, or 2.7 per cent to 22,707. The Nasdaq composite, which has a high concentration of tech stocks, retreated 185 points, or 2.8 per cent, to 6,482.

“For a while now there’s been an adage in the markets that as long as Apple was doing fine, everyone else would be OK,” said Neil Wilson, chief markets analyst at Markets.com. “Therefore, Apple’s rare profit warning is a red flag for market watchers. The question is to what extent this is more Apple-specific?”

READ MORE: Got $1,100? Apple shows off its most expensive iPhone yet

Apple’s warning couldn’t have come at a worse time for stock market investors given the wipeout in late 2018, when many global indexes posted their worst performances in a decade amid concerns about the global economy and the prospect of further U.S. interest rate hikes.

A weak report on U.S. manufacturing was also weighing on the market. The Institute for Supply Management said its index of manufacturing fell to its lowest level in two years, and new orders have fallen sharply since November. Manufacturing is still growing, but at a slower pace than it has recently.

In times of market stress and volatility, there are some assets that traditionally do well as investors perceive them as safer to hold. U.S. government bond prices, gold and high-dividend stocks like utilities all rose.

Apple stock has slumped 38 per cent since early October as investors feared a sales slowdown in China. The company also recently announced that it would stop disclosing how many iPhones it sold each quarter, and many investors felt that suggested the company was trying to hide signs that its sales were cooling off. Its stock fell to $143.58.

Other major tech companies have also taken huge losses over the last three months as the market endured its worst slump in almost a decade. While stocks rebounded slightly at the end of 2018, Apple’s troubles added to their losses Thursday. Microsoft shed 1.6 per cent to $99.46. In the chip industry, Intel fell 4.1 per cent to $45.17 and Qualcomm lost 2.4 per cent to $56.04 while Skyworks skidded 7.6 per cent to $62.77.

Among big industrial companies, Caterpillar gave up 3.5 per cent to $121.90 and Deere lost 2.5 per cent to $144.93. Companies that make heavy machines like construction equipment are facing less demand as China’s economy, the largest in the world after the U.S., loses strength. They’re also dealing with higher costs for metals as a result of import taxes.

Bonds prices jumped. The yield on the 10-year Treasury note fell to 2.58 per cent from 2.66 per cent late Wednesday, a large move.

Markets overseas held up a bit better. Germany’s DAX and the French CAC 40 both fell 1.2 per cent, and Britain’s FTSE 100 dipped 0.2 per cent. In Asia, tech-related stocks suffered most. South Korea’s Kospi ended 0.8 per cent lower and Hong Kong’s Hang Seng gave up 0.3 per cent.

Oil prices were little changed. U.S. crude stayed at $46.52 a barrel in New York and Brent crude rose 0.4 per cent to $55.13 a barrel in London. Oil prices have nosedived almost 40 per cent since early October, and investors’ fears about falling demand in China and elsewhere were a key reason for the decline.

The dollar weakened. It fell to 107.46 yen from 109.21 yen. The euro rose to $1.1403 from $1.344. The British pound fell to $1.2596 from $1.2690.

Gold also rose, by 0.6 per cent to $1,291 an ounce.

Some experts believe that the market volatility could eventually lead to changes in the policies that are concerning investors. The Fed, for example, could slow the pace of its interest rate increases if markets continue to drop. And U.S. President Donald Trump could become more open to settling the trade dispute with China.

“It is a well-known fact that Trump perceives the markets as a true barometer of his presidency,” said Piotr Matys, a strategist at Rabobank International.

The Associated Press

Like us on Facebook and follow us on Twitter.

Just Posted

Career fair a success for many

700 job hunters visited the Black Press Extreme Education and career fair in Prince George Oct. 11

Cariboo-Prince George candidates address the housing crisis at forum

Questions from the public covered housing, forestry, healthcare, climate change, gender equality and more

Elementary school students compete in a cross country race

The event held at the Nechako Valley Sporting Association grounds saw students from across SD91 participate

Hockey breakast club a success, says organizer

Club aims to expose kids to hockey and help them develop their game

Activities undertaken by the 899 Squadron

Vanderhoof air cadet’s held their first monthly commanding officer parade of the new training year on Sept. 24

VIDEO: #MeToo leader launches new hashtag to mobilize U.S. voters

Tarana Burke hopes to prompt moderators to ask about sexual violence at next debate

UPDATE: British couple vacationing in Vancouver detained in U.S. after crossing border

CBP claims individuals were denied travel authorization, crossing was deliberate

After losing two baby boys, B.C. parents hope to cut through the taboo of infant death

Oct. 15 is Pregnancy and Infant Loss Awareness Day in B.C.

Cheating husband sues mistress for gifted ring after wife learns about affair

The husband gave his mistress $1,000 to buy herself a ring in December 2017

B.C. massage therapist reprimanded, fined for exposing patients’ breasts

Registered massage therapist admits professional misconduct

B.C. boosts legal aid funding in new payment contract

‘Duty counsel’ service restored in some communities, David Eby says

Rugby Canada helps recovery efforts in Japan after typhoon cancels final match

Canadian players wanted to “give back in whatever small way they could”

Alberta to join B.C.’s class-action lawsuit against opioid manufacturers, distributors

B.C. government claims opioids were falsely marketed as less addictive than other pain meds

VIDEO: Trudeau, Singh posture for ‘progressive’ votes while Scheer fights in Quebec

NDP Leader Jagmeet Singh, whose party has been on the rise in recent polls, is campaigning in Toronto

Most Read