Stocks thumb, Dow falls 659 points after Apple's bombshell China warning
Apple eats some of Wall Street's greatest fears.
US stocks fell sharply Thursday morning after Apple announced that it would miss out on quarterly sales requests due to weakening growth and trading tensions in China. Apple (AAPL), among the world's most-held stocks, declined 8%.
The Dow Jones Industrial Average doubled as much as 677 points in an hour to trade, and then began to climb back and shut down 656 points or nearly 3 percent.
The Apple stock fell by 10 percent and deleted $ 72 billion in value. Other major exporters, including technology and heavy machinery companies, also suffered major losses. Some of the worst drops were on chipmakers making components used in smartphones and other gadgets.
"For a while, there has been a saying in the markets that as long as Apple did well, everyone else would be OK," he said. Neil Wilson, Market Analyst at Markets.com. "Therefore, Apple's rare profit warning is a red flag for market viewers. The question is to what extent is this more Apple-specific."
Investors were also disturbed by a report Thursday that showed signs of weakness in US production.
In a letter to the shareholders Wednesday, Apple CEO Tim Cook iPhone said demand is declining in China and will damage the revenue for the October-December quarter. Cook said Apple expects revenues of $ 84 billion in the quarter. That's $ 7 billion less than expected analysts.
S & P 500 dropped 60 points to 2,449. The Dow deleted 642, or 2.7 percent, to 22707. Nasdaq, which has a high concentration of tech stocks, withdrew 1[ads1]85 points, or 2.8 percent to 6482.
"For a while, there has been a saying on the markets that as long as Apple did well, everyone else would be ok," said Neil Wilson, market analyst at Markets.com. "That's why Apple's rare profit warning is a red flag for the market viewers. The question is to what extent is this more Apple-specific? "The bad Apple news was offset by some positive headlines elsewhere. ADP said on Thursday that the US is adding 271,000 private sector jobs in December, and it's easy to estimate. And Bristol-Myers Squibb (BMY) showed strong Trust by separating $ 74 billion in a blocked deal to acquire drug manufacturer Celgene (CELG), shares of Celgene spiked more than 30% on mega takeover, while Bristol-Myers fell.
Markets shake after Apple announces sale in China
Apple's strong warning reinforced several investor concerns. Firstly, it suggests that analysts may be too optimistic about corporate earnings in the challenging global environment. And Apple's trouble navigating the China slopes fears that the decline of the world's No. 2 economy is already damaging the profits of multinational companies.
Shares in Chinese-sensitive stocks like Boeing (BA), Tiffany (TIF), Deere (DE) and Qualcomm (QCOM) dropped on Thursday.
The Apple news is "feeding fear of slower global growth and further risk aversion," wrote Kit Juckes, strategist at Societe Generale, in a note to clients on Thursday. Juckes said it also supports "soft" production numbers out of China in the last few days showing that the activity has been signed.
Some analysts warn that Apple's problems may be more company-specific than global in nature. Apple's iPhone price hikes have damaged demand, especially as customers upgrade their smartphones less frequently.
"The global market for + 700 dollars phones has clearly peaked," wrote Nicholas Colas, co-founder of DataTrek Research, to clients on Thursday.
Apple vendors have at least predictable developments. Cirrus Logic (CRUS), Skyworks Solutions (SWKS) and Broadcom (AVVGO) were all significantly lower.
Thursday's sales study shows how many of the same fears that made the US stock market in 2018 the worst in a decade are still roiling markets. Stocks started in 2019 with a thumb on Wednesday's opening bell before we reverse course and close solidly higher. Nasdaq expanded its winning streak to five days, the longest since August.
Attention now comes to Friday's US job number. A weak December report may strengthen the jitters that the US economy is down. On the other hand, stronger-than-expected wage growth may remind investors that a slowdown is not the same as a recession.
"For all the latest volatility in the financial markets, the US economy remains in a healthy form 2019," Andrew Hunter, senior US economist at Capital Economics, wrote in a report on Thursday.
