On Wednesday, Apple Chairman Tim Cook said in a letter to investors that an economic slump in China, plus US trade tensions, have resulted in a drop in iPhone sales, forcing the company to downgrade earnings forecasts for the first quarter of 2019.
Battered by negative Apple news, US stock indices dropped sharply on Thursday morning. The Dow Jones fell 650 points, around 2.8 per cent, while the S&P declined 500 points, shedding 2.4 per cent of its value, and the NASDAQ retreated 2.8 per cent, CNN reports.
This represents the biggest stock market dive since 5 December when US stocks suffered a dramatic decline; the Dow Jones fell 800 points back then due to renewed concerns over Washington’s trade dispute with China and indications of a possible looming economic recession.
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This time, shortly after the decline, the Dow Jones regained points and the net fall, as of the time of publication, currently stands at 409 points.
On 2 January, Apple CEO Tim Cook noted that China’s economy slowed in the second half of 2018 amid expectations that rising trade tensions with the United States will continue to impact the company’s sales.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook said on Wednesday. “In fact, most of our revenue shortfall to our guidance, and over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”
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Apple now expects to achieve sales turnover of approximately $84 billion in the final quarter of 2018 (Q4), compared with the company’s earlier revenue forecasts of between $89 billion and $93 billion.
Although non-phone categories, including the Mac, Apple Watch and iPad, grew 19 per cent worldwide, Cook noted that more than 100 per cent of the company’s fourth quarter year-over-year revenue decline occurred due a drop in Chinese sales of iPhones and other Apple product.
Other factors adversely affecting Apple include a strong US dollar and an economic slowdown in many emerging markets, Cook added.