Apple’s worst day of trading has sent shockwaves around the world, affecting global markets and it is also set to affect Australian stocks.
Stocks tumbled on Wall Street, with technology companies suffering their worst loss in seven years, after Apple reported that iPhone sales in China are slumping.
The rare warning of disappointing results from Apple reinforced investors’ fears that the world’s second-biggest economy is losing steam and that trade tensions between the US and Beijing are making things worse.
At the closing bell, the Dow Jones Industrial Average stood at 22,686.42, down more than 650 points or 2.8 per cent.
The broadbased S&P 500 slid 2.5 per cent to 2,447.95, while the tech-rich Nasdaq Composite Index sank 3.1 per cent to 6,457.13.
Apple plunged 10 per cent to $US142.19 in its worst session in five years, losing almost $US75 billion 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.
Today’s plunge for Apple has made it its worst day of trading since January 2013, and it extends the company’s painful year-end trend into 2019.
The SPI200 futures contract was down 36 points, or 0.65 per cent, at 5,541.0, at 8am AEDT, hinting at an early slide for the benchmark ASX/200.
Meanwhile, the local dollar has climbed back above 70 US cents after a dramatic flash crash dominated Thursday’s currency headlines.
The Aussie is currently buying 70.02 US cents from 69.42 US cents on Thursday.
Overnight, technology shares led a sell-off across global markets after Apple cut its revenue forecast for the first time in nearly 12 years.
Today’s losses push Apple’s overall market valuation below $US700 billion and behind the market cap of Alphabet to become the fourth most valuable publicly traded US company — down from the top spot just two months ago.
The company has lost $US450 billion in market value since its peak of about $US1.1 trillion last year.
Markets.com chief markets analyst Neil Wilson said: “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.
“Therefore, Apple’s rare profit warning is a red flag for market watchers. The question is to what extent this is more Apple-specific.”
In a letter to shareholders Wednesday, Apple CEO Tim Cook said iPhone demand is waning in China and would hurt revenue for the October-December quarter.
Cook said Apple expects revenue of $US84 billion for the quarter. That’s $US7 billion less than analysts expected.
Cook’s comments echoed the concerns that have pushed investors to flee the stock market over the last three months.
Apple is the latest company grappling with increasing Chinese consumer anxiety. Other brand names such as Ford Motor Co. and jeweller Tiffany & Co. already have reported abrupt declines in sales to Chinese buyers.
China still is one of the fastest-growing economies, with 2018’s expansion forecast at about 6.5 per cent. But China’s tariff fight with the US and an avalanche of bad news about tumbling auto and real estate sales are undermining consumer confidence after two decades of almost unbroken rapid growth.
Investors were also unsettled by a report that showed 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.
Markets overseas also stumbled. Germany’s DAX dropped 1.5 per cent and the French CAC 40 fell 1.7 per cent, and Britain’s FTSE 100 gave up 0.6 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.
“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.
But oil prices edged higher.
US crude rose 1.2 per cent to $US47.09 a barrel in New York and Brent crude rose 1.9 per cent to $55.95 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.