NEW YORK (REUTERS) - The Dow Jones Industrial Average shed more than 400 points on Monday (Nov 19), as a slump in Apple shares battered the tech sector, with conflicting signals over the state of play between the United States and China on their trade dispute kept investors on edge.
Shares of Apple Inc fell 3.8 per cent after the Wall Street Journal reported the company had cut production orders in recent weeks for all three iPhone models launched in September.
The iPhone maker's stock, which has played a major role in powering a decade-long bull run for equities, is down nearly 20 per cent from a record high in October following a disappointing holiday-quarter sales forecast and weak outlook from several of its suppliers.
The stock was the biggest drag on the technology sector, which fell 3.3 per cent and was the top loser among the 11 major S&P sectors trading in the red.
Consumer discretionary stocks tumbled 2.1 per cent and communication services fell 2.7 per cent.
"Without the FAANG leadership, including Apple, the market is going to struggle," said Peter Cecchini, managing director and chief market strategist at Cantor Fitzgerald in New York.
Trading volumes were thin in a holiday-shortened week ahead of Thanksgiving on Thursday and a shorter session on Friday which brings a slight volatility to markets, traders said.
Shares of Apple suppliers were also hit, with Lumentum Holdings Inc, Universal Display Corp, Cirrus Logic Inc and Skyworks Solutions Inc down between 2.6 per cent and 6 per cent.
Each of the five FAANG stocks – Facebook, Amazon, Apple, Netflix and Google-parent Alphabet – slipped into a bear market on Monday - meaning a fall of 20 per cent or more from the stock's 52-week high.
Facebook's stock hit its lowest level since February 2017 after Journal reported that CEO Mark Zuckerberg blamed second-in-command Sheryl Sandberg for the Cambridge Analytica scandal and its subsequent fallout. The WSJ's report adds more fuel to criticism of Facebook's handling of the scandal and whether the two top executives have been too slow to change its platform.
The world's largest chip maker chipmaker Nvidia saw its share price plunge 12 per cent after it flagged a drop in revenue for the current quarter on falling demand for its graphics card. Cryptocurrency mining had fueled demand for those cards late last year but this has all but dried up as prices of bitcoin and other cryptocurrencies tanked and mining became no longer profitable.
"There's been a loss of trust in managements at Apple and Nvidia - both overpromised and underdelivered ... Rarely do you see these kind of moves in a holiday week," said Doug Biben, founder and portfolio manager at BCM, Los Angeles.
At 12:59 p.m. EDT the Dow Jones Industrial Average was down 392.90 points, or 1.55 per cent, at 25,020.32, the S&P 500 was down 40.74 points, or 1.49 per cent, at 2,695.53 and the Nasdaq Composite was down 185.94 points, or 2.57 per cent, at 7,061.93.
Over the weekend, Asia-Pacific leaders failed to agree on a communique for the first time ever at a meeting in Papua New Guinea with U.S.-China trade worries on the forefront.
US Vice President Mike Pence said in a blunt speech on Saturday that United States will not back down from its trade dispute with China unless Beijing bows to US demands, dampening Friday's trade optimism that was fueled by President Donald Trump's comments.
Boeing Co and Caterpillar Inc, seen as trade sensitive stocks, fell 4.8 per cent and 2.5 per cent, respectively.
Declining issues outnumbered advancers for a 2.46-to-1 ratio on the NYSE and for a 2.59-to-1 ratio on the Nasdaq.
The S&P index recorded 26 new 52-week highs and 16 new lows, while the Nasdaq recorded 16 new highs and 123 new lows.