U.S. stocks slid after Apple (AAPL) lowered its outlook for fiscal first quarter 2019 revenue, validating concerns of deteriorating demand for flagship products from one of the country’s largest tech companies and propelling worries of a global growth slowdown.
The S&P 500 (^GSPC) fell 2.48%, or 62.14 points, as of market close Thursday. The Dow (^DJI) slid 2.83%, or 660.02 points, and posted its biggest drop since December 24, which had been the worst Christmas Eve performance for the index on record. The Nasdaq (^IXIC) declined 3.04%, or 202.34 points.
Any moves in Apple’s stock contribute heavily to shifts in the three major indices. Apple makes up nearly 10% of the tech-heavy Nasdaq and 3.4% of the S&P 500. And every $1 loss in Apple’s share price contributes to an about 6.8-point decline on the price-weighted Dow – as well as a $4.75 billion reduction in Apple’s market capitalization.
Apple shocked investors after market close Wednesday by pre-announcing it was lowering its revenue expectations for the fiscal first quarter 2019, which encapsulates the key holiday season. The tech giant lowered its quarterly revenue guidance to $84 billion from the $89 billion to $93 billion it projected earlier and shaved down its outlook for gross margins.
Apple’s stock slumped 9.96% to $142.19 per share as of market close Thursday.
Beyond the downwardly revised guidance, Apple’s justification for its revenue outlook reduction ignited investor concern. Apple CEO Tim Cook said in his letter to investors that demand for the company’s weakness in Greater China and other emerging markets contributed to the “vast majority of the year-over-year iPhone revenue decline,” and noted that “China’s economy began to slow in the second half of 2018.”
The explicit references to weakness in the world’s second largest economy was taken by many investors as further confirmation of a global growth slowdown. Apple’s announcement follows a slew of data from China pointing to weakening conditions in some of the country’s biggest industries. On Wednesday, the Caixin/Markit Manufacturing Purchasing Managers’ Index for China showed a reading of 49.7 in December from 50.2 in November, the first time since May 2017 that the reading fell below 50, indicating contraction in manufacturing activity.
Apple’s announcement also sent a jolt through currency markets. Art Cashin, managing director of UBS Financial Services, pointed out in a note Thursday that at about 9:30 a.m. in Sydney, Australia, a burst of buying hit the Japanese yen, a currency generally viewed as a safe haven investment. The yen shot up 8% higher against the Australian dollar in minutes, and nearly 10% higher against the Turkish Lira. Although the yen gave back half of those moves within the next half-hour, “it was historically a massive, massive move,” Cashin noted. The U.S. Dollar/Yen declined 3.4% at the lows of Wednesday evening, the biggest drop since November 2016.
