Apple’s Warning Sinks Wall Street

Apple

U.S. stocks declined sharply on Thursday after the CEO of Apple told investors the company is grappling with weak China sales. As a result, the iPhone maker slashed its quarterly sales estimate for the first time in 15 years.

Stocks Plunge

Wall Street’s major indexes headed for big losses on Thursday, with the Dow Jones Industrial Average falling as much as 678 points in the early part of the day. The blue-chip average closed down 660.02 points, or 2.8%, at 22,686.22. Twenty-nine of 30 index members recorded losses.

Shares of Apple Inc. (AAPL) bled 9.9%, bringing the company’s total market capitalization to $674.8 billion. The company peaked above $1 trillion last year. Read: Apple Becomes Wall Street’s First Trillion-Dollar Company.

Plunging Apple stock weighed on other technology companies. Intel Corp (INTC) fell 5.3%, Microsoft Corp (MSFT) lost 3.4% and Cisco Systems Inc. (CSCO) closed down 3.3%.

The broad S&P 500 Index finished down 2.5% at 2,447.89. Nine of 11 primary sectors contributed to the decline, with information technology falling 5.1%.

The technology-focused Nasdaq Composite Index lost 4% to close at 6,463.50.

Apple’s Big China Problem

Apple’s stock began to fall after-hours on Wednesday after CEO Tim Cook told investors to prepare for lower sales during the holiday quarter. The downward revision, Apple’s first in 15 years, was due to weaker demand for iPhones in China, one of Apple’s target markets.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook said in his letter. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

After decades of explosive growth, the Chinese economy has experienced a noticeable slowdown in recent years. An uncertain trade outlook and runaway debt have made matters worse. Signs of a bottom in China’s GDP growth have yet to emerge, and recent indicators ranging from retail sales to manufacturing suggest more pain is on the way.

Mixed Data

Investors sifted through a batch of economic data on Thursday that painted a mixed picture of the U.S. economy.

On the one hand, private-sector job creation rose much faster than expected last month, offering reassurance that the domestic labor market was still on track. ADP’s private payrolls report showed the addition of 271,000 jobs for the month of December, up from a revised 157,000-pace the month before. Analysts had called for a gain of 178,000.

The U.S. Department of Labor will issue the official nonfarm payrolls report Friday at 8:30 a.m. ET.

Meanwhile, the latest manufacturing report from the Institute for Supply Management (ISM) showed a sharp slowdown in U.S. factories last month. The ISM manufacturing purchasing managers index (PMI) fell to 54.1 in December from 59.3 the month before. A median estimate of analysts anticipated a fall to 57.9.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi