US stocks plummet after Apple reveals iPhone sales slump

'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'

The day's numbers for the Dow Jones Industrial Average are displayed on a screen at the Nasdaq MarketSite in Times Square, New York, after Apple issued a profit warning (Getty Images)

Technology companies have suffered their worst losses on Wall Street in seven years as stocks tumble after Apple announced slumping iPhone sales.

The rare news of disappointing results from the California tech giant reinforced investors’ fears that the world’s second-biggest economy was losing steam and that trade tensions between Washington and Beijing were making things worse.

The Dow Jones Industrial Average plunged 660 points on Thursday and the broader S&P 500 index fell 2.5 per cent following the California tech giant’s surprise profit warning.

Apple share prices plummeted 10 per cent, erasing more than $74bn (£58.5bn) in market value, after it downgraded its revenue forecast for the last quarter of 2018.

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.

“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.”

Investors were also unsettled by a report on Thursday that showed signs of weakness in US manufacturing.

The US-China trade dispute threatens to upset 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.

“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 earlier this week, Apple chief executive Tim Cook said iPhone demand was waning in China and would hurt the company’s revenue for the crucial festive period. Apple expects revenue of $84 billion for the last quarter of 2018, $7 billion less than analysts expected.

Mr Cook said: “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”

Apple’s announcement echoed the concerns that have pushed investors to flee the stock market over the last three months. Many global indexes posted their worst year in a decade amid concerns about the global economy and the prospect of further US 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 three per cent, to 6,463.50.

US government bond prices surged, 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.

A weak report on US manufacturing also weighed on the market on Thursday. 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.

Apple’s 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’s share price took its biggest loss in six years to end Thursday at $142.19. Microsoft shed 3.7 percent to $97.40. Among chip makers, Intel fell 5.5 percent to $44.49. The S&P 500 technology companies had their worst day since August 2011.

European stocks were also down and the pound tumbled against the dollar and euro as investors switched their money into safe havens such as the Japanese yen.

Additional reporting by agencies