Apple warning on lower sales sparks another stock market sell-off

Stocks tumbled Thursday 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 Washington and Beijing are making things worse.

The Dow Jones Industrial Average plunged as much as 677 points about an hour into trading, then began climbing back, but was still down more than 550 points late in the day. The broader S&P 500 index was down two per cent.

Apple stock plummeted 10 per cent, erasing more than $74 billion US in value. Other big exporters, including technology and 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."

Factory output also slowing

Investors were also unsettled by a report Thursday that suggested U.S. manufacturers were growing at their slowest pace in 15 years.

The U.S.-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.

• ANALYSIS: Who wins a trade war? Whoever loses least

"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.

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 $84 billion for the quarter. That's $7 billion less than analysts expected.

Apple's warning couldn't have come at a worse time for stocks given the wipeout in late 2018. Many global indexes posted their worst year in a decade amid concerns about the global economy and the prospect of further U.S. interest rate increases.

The S&P 500 lost 62.14 points to 2,447.89. The Dow slid 2.8 per cent to 22,868.22. The Nasdaq, which has a high concentration of tech stocks, retreated 202.43 points, or 3 per cent, to 6,463.50.

Canada's benchmark stock index, the S&P/TSX Composite Index, fared slightly better, down less than one per cent to 14,212.75. The TSX benefited from the price of oil gaining 47 cents US to close the day just over $47 US per barrel.

U.S. government bond prices jumped, 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.

Apple stock has slumped 39 per cent since early October. The company also recently announced that it would stop disclosing how many iPhones it sold each quarter, a move many investors suspected was an attempt to hide bad news.

Apple stock took its biggest loss since 2013 on Thursday and was down to $142.19. Microsoft shed 3.7 per cent to $97.40. Among chipmakers, Intel fell 5.5 per cent to $44.49. The S&P 500 technology companies had their worst day since August 2011.

Among big industrial companies, Caterpillar gave up 3.9 per cent to $121.51, and Deere lost 2.7 per cent to $144.05. Boeing, which sells many of its planes in China, declined four per cent to $310.90.

Companies that make heavy machinery such as construction equipment are facing less demand as China's economy, the largest in the world after the U.S., loses strength. They are also dealing with higher costs for metals as a result of tariffs.