Dow falls 660 points on Apple bombshell, US factory slowdown

New York (CNN Business)Apple is feeding some of Wall Street's
biggest fears.

The Dow dropped 660 points, or 2.8%, on Thursday after Apple
warned it will badly miss its quarterly sales forecast because
of weakening growth and trade tensions in China.

Apple (AAPL), among the world's most widely held stocks,
plummeted 10% in its darkest day in six years. The former king
of the stock market fell to the fourth-biggest public company,
behind Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOGL).

The news sent shudders through global markets. The Nasdaq
plunged 3%, closing back in bear market territory. The S&P 500
shed 2.5%, led lower by tech and industrial stocks. The market
ended near the lows of the day.

Even though the market rose slightly on Wednesday, this is still
the S&P 500's worst two-day start to a trading year since 2000,
according to Refinitiv data.

Beyond Apple, investors were also rattled by the biggest one-
month decline in US factory activity since the Great Recession.
The closely-watched ISM manufacturing index tumbled to a two-
year low, providing further evidence of slowing growth and pain
from the US-China trade war. ISM said manufacturing activity is
still growing, but suffered a "sharp decline" last month.

"Awful, and worse to come," Ian Shepherdson, chief economist at
Pantheon Macroeconomics, wrote to clients on Thursday. "Trade
wars are not easy to win."

Apple's bombshell
Apple's stark warning reinforced multiple investor concerns.
First, it suggests that analysts may be too optimistic about
corporate earnings in the challenging global environment. And
Apple's trouble navigating China backs fears that the slowdown
in the world's No. 2 economy is already hurting profits for
multinational companies.

"Trade tensions between the US and China could take an
increasing toll on companies in both nations," UBS strategists
Christopher Swann and Kiran Ganesh wrote in a note to clients on
Thursday.

Shares of China-sensitive stocks like Boeing (BA), Tiffany
(TIF), Deere (DE) and Qualcomm (QCOM) retreated.

Even Trump officials are warning of more China trouble ahead for
Corporate America. Kevin Hassett, chairman of the White House's
Council of Economic Advisers, told CNN's Poppy Harlow on
Thursday that "a heck of a lot" of US companies with sales in
China will follow Apple's footsteps by downgrading their
outlooks.

"It's not going to be just Apple," Hassett said, adding that
sales will recover if trade negotiations with China are
successful.

Trade war fallout
The Apple news is "feeding fears of slower global growth and
further risk aversion," Kit Juckes, strategist at Societe
Generale, wrote in a note to clients on Thursday. Juckes said it
also supports "soft" manufacturing numbers out of China in
recent days showing activity has contracted.

Investors continue to flock to government bonds for safety,
sending yields plunging. The 10-year Treasury yield tumbled to
an 11-month low of 2.56% on Thursday, a sharp decline from 3.23%
in November.

And Apple CEO Tim Cook offered some of the starkest evidence yet
of the negative consequences of the US-China trade war. Cook
said "rising trade tensions" with the United States are
impacting China's economy. The trade uncertainty "appeared to
reach consumers," with customer traffic in China declining, he
said.

But some analysts cautioned that Apple's troubles may be more
company specific than global in nature. Apple's iPhone price
hikes have hurt demand, especially as customers upgrade their
smartphones less frequently.

"The global market for +$700 phones has clearly topped out,"
Nicholas Colas, co-founder of DataTrek Research, wrote to
clients on Thursday.

In any case, Apple suppliers predictably plunged on the
developments. Cirrus Logic (CRUS), Skyworks Solutions (SWKS) and
Broadcom (AVVGO) tumbled 8% apiece. Best Buy (BBY), another
company that relies on Apple products, declined 2%.

Even Warren Buffett's Berkshire Hathaway (BRKB) got caught up in
the storm. Berkshire, which owns more than 250 million shares of
Apple, dropped 5%.

Jobs report is next
Major US airline stocks descended after Delta Air Lines (DAL)
warned that revenue for the quarter was a bit weaker than its
earlier guidance due to softness in fares, particularly in
December. Delta plunged 9%, while United Continental (UAL) fell
5% and American Airlines (AAL) lost 7%.

Investors failed to find much solace in better news elsewhere.
ADP said on Thursday that the United States added 271,000
private-sector jobs in December, easily topping estimates. And
Bristol-Myers Squibb (BMY) showed strong confidence by shelling
out $74 billion in a blockbuster deal to acquire drug maker
Celgene (CELG).

Thursday's selloff shows how many of the same fears that made
2018 the US stock market's worst in a decade are still roiling
markets. Stocks started 2019 with a tumble at Wednesday's
opening bell before reversing course and closing solidly higher.

Attention will now turn to Friday's US jobs numbers. A weak
December report could reinforce jitters that the US economy is
slowing. On the other hand, stronger-than-expected payroll
growth could remind investors that a slowdown is not the same
thing as a recession.

https://www.cnn.com/2019/01/03/inves...-market-today-
apple-dow-jones/index.html