MARKET SNAPSHOT: Dow Falls More Than 400 Points After Weak Manufacturing Data, Apple Warning

By Chris Matthews and Mark DeCambre, MarketWatch

Apple outlook stokes fears over slowing Chinese economy

U.S. stock indexes traded sharply lower midday Thursday, extending declines after a survey of American manufacturers showed the sector growing at its slowest pace in two years, and following Apple Inc.'s move to lower its sales forecasts, citing weak demand from China that underscored broader concerns about the global economy.

How are the benchmarks performing?

The Dow Jones Industrial Average fell 418 points, or 1.7%, at 22,917, the S&P 500 index shed 31 points, or 1.1%, at 2,481, while the Nasdaq Composite tumbled 93 points, or 1.4%, at 6,481.

What's driving the market?

Stock markets took a turn for the worse Thursday morning, after a survey from the Institute for Supply Management showed the U.S. manufacturing sector growing at the slowest pace in two years, helping to intensify concerns among investors that the U.S. economy is slowing along with other large economies in Asia and Europe.

The report came on the heels of Apple (AAPL) slashing its quarterly revenue forecast for the first time in more than 15 years Wednesday evening, in a move that the iPhone maker's chief executive, Tim Cook, said was prompted by signs of weakness in the world's second-largest economy: China.

First Take:Apple lives up to Wall Street's fears with massive revenue shortfall (http://www.marketwatch.com/story/apple-lives-up-to-wall-streets-fears-with-massive-revenue-shortfall-2019-01-02)

The announcement by Apple comes as investors are wrestling with worries that a protracted tariff dispute between Washington and Beijing is starting to hurt some of the biggest and most influential U.S. companies, threatening the growth outlook and a longstanding bull market that already appears in tatters.

The ISM data and Apple's announcement follows fresh signs of Chinese economic weakness after Beijing's official read of manufacturing for December (http://www.marketwatch.com/story/data-showing-chinese-manufacturing-cooling-put-asia-stock-markets-in-early-hole-for-2019-2019-01-01), released Wednesday, showed a more severe drop than one issued earlier, reflecting a fall to the weakest level since February 2016.

Investors also remain focused on the Federal Reserve and its plans for interest rate policy in 2019, ahead of Friday morning's employment situation report. The jobs numbers will be a key data point for Fed officials, as they try to determine whether the U.S. economy is healthy enough to demand further rate increases this year, after raising rates four times in 2018.

At its most recent meeting in December, the median forecast by member's of the central bank's interest-rate setting committee predicted two more rate increases in 2019, but investors are placing a more than 71.6% probability that the central bank stays pat this year, according to CME Group data (https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html), while Dallas Fed President Robert Kaplan advocated for a pause (http://www.marketwatch.com/story/feds-kaplan-calls-for-pause-in-interest-rate-hikes-says-open-to-slowing-balance-sheet-runoff-2019-01-03) in interest-rate increases during a Thursday-morning interview on Bloomberg Television.

What data are in focus?

What are analysts saying?

The ISM Manufacturing survey data "are clearly showing the hesitancy of businesses to spend and invest given the macro headwinds facing the economy, with the biggest issue being trade," Yousef Abbasi, global market strategist with INTL FCStone told MarketWatch.

"We ended 2018 with worries about growth and earnings, and in the first two days of 2019 we've received more bad Chinese data and an AAPL revenue guidance cut," Tom Essaye, president of the Sevens Report, wrote in a Thursday-morning note to clients.

"Neither of those events should be material surprises (China's been weak for a while and analysts have been cutting estimates on AAPL for months), but if we're going to sustain a rally this market needs actual good news, and there hasn't been much lately," he added.

Which stocks are in focus?

Apple's shares are down 9.2% early Thursday, weighing heavily on both the price-weighted Dow and the market-cap weighted S&P 500.

Bristol-Myers Squibb Co. (BMY) stock is down 12.2%, after the firm announced a $74 billion cash-and-stock acquisition of Celgene Corp. (CELG) Thursday morning. Celgene shares are up more than 28%.

Shares of Delta Air Lines Inc. (DAL) are down 8.3% Thursday, after the company said (http://www.marketwatch.com/story/deltas-revenue-outlook-weighs-on-airline-sector-2019-01-03) that revenue in December was lower than expected. The news helped drag down the stocks of rivals such as American Airlines Group Inc. (AAL), Southwest Airlines Co. (LUV), and United Continental Holdings Inc (UAL).

How did markets trade Wednesday?

On Wednesday, the Dow rose 18.78 points to finish at 23,346.24, while the S&P 500 index climbed 3.18 points, or 0.1%, to 2,510.03. The Nasdaq rose 30.55 points, or 0.5%, to close at 6,665.94.

How are other markets trading?

Asian markets closed broadly lower, with Hong Kong's Hang Seng Index , China's Shanghai Composite Index and South Korea's Kospi losing ground. Japan's markets were closed.

In Europe, stocks are trading broadly lower, with the Stoxx Europe 600 and the FTSE 100 both in the red.

Crude-oil futures were trading flat after climbing to a two week high (http://www.marketwatch.com/story/oil-prices-pull-back-to-kick-off-trading-in-the-new-year-2019-01-02) on Wednesday. The U.S. dollar edged lower, while gold prices advanced.

(END) Dow Jones Newswires

January 03, 2019 11:56 ET (16:56 GMT)

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