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Apple’s Glum News About China Sales Sends Stocks Lower Apple’s Glum News About China Sales Sends Stocks Lower
(35 minutes later)
Apple gave stock investors another reason to worry about the Chinese economy, and they reacted on Thursday with a retreat from global markets.Apple gave stock investors another reason to worry about the Chinese economy, and they reacted on Thursday with a retreat from global markets.
The company surprised shareholders on Wednesday by warning of a slowdown in sales in China, where it said consumers had pulled back amid “a climate of mounting uncertainty.” As a result, Apple said its overall sales would be lower in the first quarter. The company’s shares fell more than 8 percent in early trading in the United States.The company surprised shareholders on Wednesday by warning of a slowdown in sales in China, where it said consumers had pulled back amid “a climate of mounting uncertainty.” As a result, Apple said its overall sales would be lower in the first quarter. The company’s shares fell more than 8 percent in early trading in the United States.
Investors have recently heard a steady drumbeat of disappointing news about China’s economy, the world’s second-largest. Reports about manufacturing, exports, retail sales and industrial production have all shown evidence of weakness.Investors have recently heard a steady drumbeat of disappointing news about China’s economy, the world’s second-largest. Reports about manufacturing, exports, retail sales and industrial production have all shown evidence of weakness.
But Apple’s warning was one of the clearest indications yet of how the slowdown in China, fueled in part by a trade war with the United States, can hurt global businesses.But Apple’s warning was one of the clearest indications yet of how the slowdown in China, fueled in part by a trade war with the United States, can hurt global businesses.
[Read more about Apple’s announcement and its implications for the global economy.] [Read more about China’s consumers and their sagging confidence.]
The initial decline in stock markets on Thursday — around 1 percent on Wall Street — worsened as a reading of manufacturing activity in the United States, from the Institute for Supply Management, fell sharply. Shares in Asia and Europe were also mostly lower, and investors shed technology stocks in particular. Apple could be the first of many companies to issue such a warning, a top White House economic adviser said on Thursday.
Biotechnology stocks bucked the trend, rising sharply after Bristol-Myers Squibb said it would buy cancer-drug maker Celgene in a deal valued at $74 billion. Shares of Celgene rose 29 percent in early trading Thursday. (Bristol-Meyers shares were down 12 percent after the announcement.) “There are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China,” Kevin Hassett, the chairman of the White House Council of Economic Advisers, said during an interview with CNN. “That puts a lot of pressure on China to make a deal.”
The initial decline in stock markets on Thursday — around 1 percent on Wall Street — worsened as a reading of manufacturing activity in the United States, from the Institute for Supply Management, fell sharply, adding to concerns of a slowdown in the domestic economy. The ISM measure fell to its lowest in two years.
By the afternoon, the S&P 500 was down closer to 2 percent. Shares in Asia and Europe were also lower, and investors shed technology stocks in particular.
Biotechnology stocks bucked the trend, rising sharply after Bristol-Myers Squibb said it would buy cancer-drug maker Celgene in a deal valued at $74 billion. Shares of Celgene rose 22 percent. (Bristol-Meyers shares were down 15 percent.)
Apple said its lowering of revenue expectations was tied to weak sales in Greater China — an area that includes mainland China, Hong Kong and Taiwan — for the quarter that ended on Saturday.Apple said its lowering of revenue expectations was tied to weak sales in Greater China — an area that includes mainland China, Hong Kong and Taiwan — for the quarter that ended on Saturday.
The disclosure added to investor worries that include rising interest rates and political turmoil in the United States as well as the continuing trade war, which Timothy D. Cook, Apple’s chief executive, cited in a letter to shareholders.The disclosure added to investor worries that include rising interest rates and political turmoil in the United States as well as the continuing trade war, which Timothy D. Cook, Apple’s chief executive, cited in a letter to shareholders.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” Mr. Cook wrote. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” Mr. Cook wrote. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”
[Read more about Apple’s announcement and its implications for the global economy.]
Apple had already been giving some investors pause, especially with regard to the iPhone, a signature product that helped the tech giant become the first American public company to reach a market capitalization of $1 trillion. But after years of explosive growth, iPhone sales have been sluggish for three years. Apple has maintained revenue growth by charging more for each device.Apple had already been giving some investors pause, especially with regard to the iPhone, a signature product that helped the tech giant become the first American public company to reach a market capitalization of $1 trillion. But after years of explosive growth, iPhone sales have been sluggish for three years. Apple has maintained revenue growth by charging more for each device.
But many investors and analysts see growing evidence that iPhone sales may soon begin to decline rather than simply slowing.But many investors and analysts see growing evidence that iPhone sales may soon begin to decline rather than simply slowing.
Tech-heavy indexes led the losses in Asia, where many of Apple’s suppliers are based. South Korea’s Kosdaq fell 1.9 percent, and Taiwan’s Taiex fell 0.7 percent. Markets in Japan, another home to Apple suppliers, were closed for a holiday.Tech-heavy indexes led the losses in Asia, where many of Apple’s suppliers are based. South Korea’s Kosdaq fell 1.9 percent, and Taiwan’s Taiex fell 0.7 percent. Markets in Japan, another home to Apple suppliers, were closed for a holiday.
Activity in other markets was more muted.Activity in other markets was more muted.
In China, the Shanghai Composite Index was flat, and Hong Kong’s Hang Seng Index fell 0.3 percent.In China, the Shanghai Composite Index was flat, and Hong Kong’s Hang Seng Index fell 0.3 percent.
In Europe, the Euro Stoxx 600 had slipped 1 percent, dragged down by the technology sector. The CAC 40 in France and the Dax in Germany both slid 1.6 percent. London’s FTSE 100 was down 0.6 percent.In Europe, the Euro Stoxx 600 had slipped 1 percent, dragged down by the technology sector. The CAC 40 in France and the Dax in Germany both slid 1.6 percent. London’s FTSE 100 was down 0.6 percent.