US stocks tumbled on Thursday with technology companies suffering their worst loss in seven years after Apple reported iPhone sales in China are slumping.
The rare warning of disappointing results from Apple reinforced investors’ fears the world’s second-biggest economy is losing steam and that trade tensions between Washington and Beijing are making things worse.
The Dow Jones Industrial Average plunged 660 points, and the broader S&P 500 index fell 2.5%.
Apple stock plummeted 10%, erasing more than 74 billion dollars in market value. Technology companies and other major exporters, including heavy-machinery companies, also took big losses.
Some of the worst drops were at chipmakers that make components used in smartphones and other gadgets.
“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.”
Investors were also unsettled by a report showing signs of weakness in US manufacturing.
The US-China trade dispute 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, combined with slower growth in China, were 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.
Waning demand
In a letter to shareholders on Wednesday, Apple CEO Tim Cook said iPhone demand is waning in China and would hurt revenue for the October-December quarter.
Mr Cook said Apple expects revenue of 84 billion dollars for the quarter – seven billion dollars less than analysts expected.
The comments echoed the concerns that have pushed investors to flee the stock market over the last three months.
Many global indexes posted their worst year in a decade amid concerns about the global economy and the prospect of further US interest rate increases.
The S&P 500 lost 62.14 points to 2,447.89. The Dow slid 2.8% to 22,868.22. The Nasdaq, which has a high concentration of tech stocks, retreated 202.43 points, or 3%, to 6,463.50.
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 to put their money.
A weak report on US manufacturing also weighed 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.
Apple’s stock has slumped 39% since early October. The company also recently announced 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 Thursday and ended at 142.19 dollars. Microsoft shed 3.7% to 97.40 dollars. Among chip makers, Intel fell 5.5% to 44.49 dollars. The S&P 500 technology companies had their worst day since August 2011.
Among big industrial companies, Caterpillar gave up 3.9% to 121.51 dollars, and Deere lost 2.7% to 144.05 dollars. Boeing, which sells many of its planes in China, declined 4% to 310.90 dollars.
Companies that make heavy machinery such as construction equipment are facing less demand as China’s economy, the largest in the world after the US, loses strength. They are also dealing with higher costs for metals as a result of tariffs.
Markets overseas also stumbled. Germany’s DAX dropped 1.5% and the French CAC 40 fell 1.7%, and Britain’s FTSE 100 gave up 0.6%. In Asia, tech-related stocks suffered most. South Korea’s Kospi ended 0.8% lower and Hong Kong’s Hang Seng gave up 0.3%.
Oil prices edged higher. US crude rose 1.2% to 47.09 dollars a barrel in New York and Brent crude rose 1.9% to 55.95 dollars a barrel in London.
Oil prices have nosedived almost 40% since early October, and investors’ fears about falling demand in China and elsewhere were a key reason for the decline.
The yield on the two-year Treasury note slid to 2.39% from 2.50%, and the yield on the 10-year note sank to 2.56% from 2.66%. Both were large moves.
The dollar weakened. It fell to 107.777 yen from 109.21 yen. The euro rose to 1.1391 dollars from 1.344 dollars. The British pound fell to 1.2630 dollars from 1.2690 dollars.
Gold climbed 0.8% to 1,294.80 dollars an ounce. Silver rose 0.9% to 15.80 dollars an ounce. Copper, which is used in construction and wiring, fell 2.1% to 2.57 dollars a pound.
In other commodities trading, wholesale gasoline rose 1.8% to 1.35 dollars a gallon and heating oil climbed 2.4% to 1.74 dollars a gallon. Natural gas fell 0.4% to 2.95 dollars per 1,000 cubic feet.
