Stocks take a beating after Apple result
Stocks have tumbled on Wall Street, with technology companies suffering their worst loss in seven years, after Apple reported that iPhone sales are slipping in China.
The rare warning of disappointing results from Apple stoked investors’ fears that the world’s second-biggest economy is losing steam and that trade tensions between Washington and Beijing are making things worse. The selloff also came after a surprisingly weak report on US manufacturing.
The Dow Jones Industrial Average plunged 660 points, or 2.8 per cent, and the broader S&P 500 index fell 2.5 per cent.
Apple stock plummeted 10 per cent, wiping out more than US$74 billion (NZ$110b) off the company’s market value – almost as much as Starbucks is worth.
Other major exporters, including heavy-machinery manufacturers and tech companies such as Intel and Microsoft, also took big losses.
‘‘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.’’
Over the past year, the US and China slapped new tariffs on hundreds of billions of dollars’ worth of imports in a trade war that threatens to snarl multinational companies’ supply lines and reduce demand for their products. Companies such as General Motors, Caterpillar and Daimler have all said recently that trade tensions and slower growth in China are damaging their businesses.
‘‘When the largest and secondlargest economies in the world get into a trade dispute, the rest of the world’s going to feel the effects. That’s what we’re seeing now,’’ said Jack Ablin, chief investment officer of Cresset Wealth Advisors.
In a letter to shareholders on Thursday, Apple chief executive Tim Cook said that iPhone demand was waning in China and that the company expected revenue of US$84b for the quarter that just ended. That’s US$7b less than analysts expected.
Cook’s comments echoed the concerns that have pushed investors to flee stocks over the past three months. The US stock market in 2018 posted its worst year in a decade.
The S&P 500 lost 62.14 points, closing at 2,447.89. The Dow fell to 22,868.22. The Nasdaq, which has a high concentration of tech stocks, retreated 202.43 points, or 3 per cent, to 6463.50.
US government bond prices surged, sending yields to their lowest level in almost a year, and gold and high-dividend stocks like utilities also rose as investors looked for safer places.
The Institute for Supply Management said its index of US 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.
Apple’s stock has slumped 39 per cent since early October. The company also recently announced that it would stop disclosing how many iPhones it sold each quarter, a move many investors suspected was an attempt to hide bad news.
Apple took its biggest loss in six years and ended at US$142.19. Microsoft fell 3.7 per cent, Intel 5.5 per cent. The S&P 500 technology companies had their worst day since August 2011.
Among big industrial companies that could suffer from a drop in demand from China, Caterpillar declined 3.9 per cent, Deere 2.7 per cent and Boeing 4 per cent.
‘‘This situation is yet another example of how politics – in this case, the trade war – has exacerbated real but manageable economic concerns and turned them into something worse than they have to be,’’ Brad McMillan, chief investment officer for Commonwealth Financial Network, wrote in a note to clients.