US stocks slump after Apple reports slower iPhone sales in China
US stocks have gone into a steep slide after Apple reported a slowdown in iPhone sales 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%, erasing 67 billion dollars (£53 billion) in value.
Other big exporters including technology and machinery companies also took big losses.
Some of the worst drops were at chipmakers that make components used in smartphones and other gadgets.
The US-China trade dispute, nearly a year old, threatens to hit 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 US manufacturers also showed signs of weakness.
In a letter to shareholders on Wednesday, Apple chief executive Tim Cook said iPhone demand was waning in China and would hurt revenue for the October-December quarter.
Mr Cook said Apple expects revenue of 84 billion dollars (£66.6 billion) for the quarter, which is seven billion dollars (£5.5 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.
“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?”
Apple’s warning could not 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 US interest rate hikes.
A weak report on US 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.
US government bond prices, gold and high-dividend stocks such as utilities all rose.
Apple stock has slumped 38% 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.
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 on Thursday.
Some experts believe that the market volatility could eventually lead to changes in the policies that are concerning investors.
The Federal Reserve, for example, could slow the pace of its interest rate increases if markets continue to drop.
And US 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.