As Ap­ple goes ... stocks dive deep

As iPhone sales slip in China, in­vestors worry about trade

The Mercury News Weekend - - FRONT PAGE - TEN­SIONS BE­TWEEN WASHINGTON, BEIJING By Mar­ley Jay

NEW YORK » Stocks tum­bled Thurs­day 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 sell- off also came af­ter a sur­pris­ingly weak re­port on U. S. man­u­fac­tur­ing.

The Dow Jones In­dus­trial Aver­age plunged 660 points, or 2.8 per­cent, and the broader S&P 500 in­dex fell 2.5 per­cent.

Ap­ple stock plum­meted 10 per­cent, wip­ing out more than $74 bil­lion of the com­pany’s mar­ket value. That’s al­most as much as Star­bucks is worth and more than Lock­heed Martin, Lowe’s, Cater­pil­lar, Gen­eral Elec­tric or Mor­gan Stan­ley.

Other ma­jor ex­porters, in­clud­ing heavy-ma­chin­ery man­u­fac­tur­ers and tech com­pa­nies like 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 U. S. 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 sec­ond-largest 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 Wed­nes­day, Ap­ple CEO Tim Cook said that iPhone de­mand is wan­ing in China and that the com­pany ex­pects rev­enue of $84 bil­lion for the quar­ter that just ended. That’s $7 bil­lion less than an­a­lysts ex­pected.

Cook’s com­ments echoed the con­cerns that have pushed in­vestors to flee stocks over the past three months. The U.S. stock mar­ket in 2018 posted its worst year in a decade.

The S&P 500 lost 62.14 points Thurs­day, 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 per­cent, to 6,463.50.

U. S. 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 to put their money.

The In­sti­tute for Sup­ply Man­age­ment said its in­dex of U. S. 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 per­cent 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 $142.19. Mi­crosoft fell 3.7, In­tel 5.5 per­cent. 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 per­cent, Deere 2.7 per­cent and Boe­ing 4 per­cent.

“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.

RICHARD DREW — THE ASSOCIATED PRESS

Trader Mark Muller works on the floor of the New York Stock Ex­change on Thurs­day. Stocks went into a steep slide af­ter Ap­ple said iPhone sales in China are fall­ing.

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