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Wall Street Plunges as Factory Data, Apple, China Warning Fuel Slowdown Fears

“Investors are worried that this is an indication that things could be getting worse from here and Apple is only the tip of the iceberg,” Stovall added.

Reuters
    Jan 03, 2019 3:47 PM  PT
Wall Street Plunges as Factory Data, Apple, China Warning Fuel Slowdown Fears

NEW YORK (Reuters) - Wall Street plunged on Thursday after slowing U.S. factory activity on the heels of a dire warning regarding China from Apple Inc. (Nasdaq: AAPL) fueled fears of a global economic slowdown.

The magnitude of Apple's holiday quarter revenue shortfall sent shockwaves through the technology sector, which pulled all three major U.S. stock indexes down more than 2 percent, with the Nasdaq posting a 3 percent loss.

The Dow Jones Industrial Average fell 660 points, or 2.8 percent, to 22,686, the S&P 500 lost 62 points, or 2.5 percent, to 2,448 and the Nasdaq Composite dropped 202 points, or 3 percent, to 6,464. S&P Technology companies slid 5.1 percent, its biggest one-day percentage drop since August 2011. The Philadelphia SE Semiconductor index ended the session 5.9 percent lower.

Late Wednesday, Apple chief executive Tim Cook wrote in a letter to investors that the company had not foreseen the extent of China's economic deceleration, which was exacerbated by U.S.-China trade tensions. The iPhone maker's shares dropped 10 percent.

Adding to the sell-off pressure was a report from the Institute for Supply Management (ISM) that showed U.S. factory activity in December suffered the biggest drop since October 2008, the height of the financial crisis. Its Purchasing Manager Index (PMI) reading, while still in expansion territory, hit its lowest level in more than two years.

"The Chinese slowdown was expected but today's softer-than-expected ISM number took investors by surprise because the U.S. seemed to be the only port in the storm," said Sam Stovall, chief investment strategist of CFRA Research in New York. "But now it appears that our economic growth is facing trade related headwinds."

"Investors are worried that this is an indication that things could be getting worse from here and Apple is only the tip of the iceberg," Stovall added.

Nearly all of the top Chinese ADSs followed the downward trend in New York. Alibaba Group Holding Ltd. (NYSE: BABA) was down 4.5 percent to $130.60 per share. JD.com Inc. (Nasdaq: JD) closed off more than 4 percent at $20.35. IQiyi Inc. (Nasdaq: IQ) ended at $14.80, down nearly 3 percent. Momo Inc. (Nasdaq: MOMO) lost more than 3 percent to $24.03 per share. Baidu Inc. (Nasdaq: BIDU) slid nearly 5 percent to $154.71. Bilibili Inc. (Nasdaq: BILI) ended the day down more than 9 percent at $12.95 per share.


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