New York: US stocks plunged Thursday, with the S&P 500 down more than 2%, after slowing US factory activity on the heels of a dire revenue warning from Apple fueled fears of a global economic slowdown. Based on the latest available data, the Dow Jones Industrial Average fell 660.02 points, or 2.83%, to 22,686.22, the S&P 500 lost 57.19 points, or 2.28%, to 2,452.84 and the Nasdaq Composite dropped 185.10 points, or 2.78%, to 6,480.84
The magnitude of Apple’s holiday quarter revenue shortfall sent shockwaves through the technology sector, which pulled all three major US stock indexes down about 2% or more.
In a letter to investors on Wednesday after the bell, Apple chief executive Tim Cook said the company had not foreseen the scale of China’s economic deceleration, which was exacerbated by US-China trade war. The iPhone maker’s shares were down 9.2%.
A report from the Institute for Supply Management showed US factory activity in December suffered the biggest drop since October 2008, the height of the financial crisis. Its PMI data, while still in expansion territory, hit its lowest level in more than two years.
“There are enough data points out there that point to the fact that the global economy took a sharp downturn as the year drew to a close,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “Trade and other geopolitical issues are the biggest factors.”
Major automakers reported weak US new car sales in December, with Ford Motor Co. and General Motors Co. reporting sales falling by 8.8% and 2.7%, respectively. Ford shares edged down 0.3%, while GM dropped 3.7%.
Of the 11 major sectors in the S&P 500, all but defensive real estate and utilities stocks were in negative territory.
Trade-sensitive industrials weighed heaviest on the Dow, led by Caterpillar Inc., 3M Co. and Boeing Co.
With fourth-quarter reporting season set to kick off a few weeks from now, analysts now see S&P 500 companies showing a 15.5% growth in profits, lowered from 20.1% on 1 October.
Following Apple’s revenue warning, technology firms are now expected to post earnings growth of 10.7% for the fourth quarter, compared with 11.6% just a few days earlier.
“(In 2019) we’re coming out of the gate with such a different vibe than we had just a year ago, when we were just starting to benefit from corporate tax cuts,” Tuz added. “It’s a slowdown after a tremendous run.”
Bristol-Myers Squibb Co. shares dropped 14.6% after the drugmaker announced plans to buy rival Celgene Corp. for about $74 billion. Celgene shares jumped 21.4% on the news.
Shares of US commercial air carriers slid after Delta Air Lines cut its fourth quarter revenue estimate. The S&P 1500 Airlines index sank 5.5%.
Declining issues outnumbered advancing ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.67-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 12 new lows; the Nasdaq Composite recorded 2 new highs and 39 new lows.
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