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

Chilliwack native Maleek Irons scores first Canadian Football League touchdown

The former W.J. Mouat Hawks star recorded a major against Toronto on Saturday

Trial dates set for three men accused of 2017 killing near Hope

Lawyers for the accused appeared in Kelowna at B.C. Supreme Court on Monday

Heroism medal for Chilliwack woman who tried to save wheelchair-bound man stuck on rail tracks

Julie Callaghan awarded Carnegie Medal from U.S.-based foundation for ‘extraordinary heroism’

Rifle thefts from Lindell Beach break-and-enter leads to arrest downtown Chilliwack

Andrew Scott Charpentier charged with numerous offences after guns seized from Reece Avenue address

Extended hours of operation at city hall for Chilliwack taxpayers

The Finance Department at city hall will be open from 8 a.m. to 5 p.m., Monday to Friday

Video shows fireworks shot at swan in Alberta

Alberta Fish and Wildlife is investigating the incident in Grande Prairie

Grey-haired bank robber hit with dye pack in Langley heist

Police are looking for an older man who may be stained with dye

‘Text neck’ causing bone spurs to grow from millennials’ skulls, researchers say

Technology use from early childhood causing abnormal bone growths in 41 per cent of young adults

B.C. teen killed by fallen tree on field trip remembered as hero

13-year-old Tai Caverhill was the first to spot the tree falling and warned his friends

Surrey RCMP raises Pride flag amid din of protesters

There were about 30 protesters on either side, and 20 Mounties doing crowd control

Should B.C. get rid of Daylight Saving Time?

The province wants to know, as state governments down south make the move

Air Canada reviewing how crew left sleeping passenger on parked plane

In a Facebook post, the woman said she woke up ‘all alone’ on a ‘cold dark’ aircraft

Canadians crash out of Women’s World Cup in 0-1 loss to Sweden

Canada missed a chance to tie the game on a penalty shot

New Lower Mainland bistro caters to board game fans and families

Local food and games at every table is the formula for the new business

Most Read