Wall St plunges as factory data, Apple warning fuel slowdown fears

Wall Street plunged on Thursday after slowing US factory activity on the heels of a dire revenue warning from Apple fuelled 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 US stock indexes down more than 2%, with the Nasdaq posting a 3% loss.

S&P Technology companies slid 5.1%, its biggest one-day%age drop since August 2011. The Philadelphia SE Semiconductor index ended the session 5.9% 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 US-China trade tensions. The iPhone maker’s shares dropped 10.0%.

A report from the Institute for Supply Management showed US factory activity in December suffered the biggest drop since October 2008, the height of the financial crisis. Its 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 US 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.

Major automakers reported weak US new car sales in December, with Ford Motor Co and General Motors Co reporting sales falling by 8.8% and 2.7%, respectively. Ford shares fell 1.5%, while GM dropped 4.1%.

The Dow Jones Industrial Average fell 660.02 points, or 2.83%, to 22 686.22, the S&P 500 lost 62.14 points, or 2.48%, to 2 447.89 and the Nasdaq Composite dropped 202.43 points, or 3.04%, to 6 463.50.

Of the 11 major sectors in the S&P 500, all but defensive real estate and utilities stocks closed in the red.

Trade-sensitive industrials also weighed on the Dow, led by Caterpillar, 3M Co and Boeing.

Bristol-Myers Squibb Co shares dropped 13.3% after the drugmaker announced plans to buy rival Celgene Corp for about $74 billion. Celgene shares jumped 20.7% on the news.

Shares of US commercial air carriers slid after Delta Air Lines cut its fourth quarter revenue estimate. The S&P 1500 Airlines index sank 5.9%.

Yields on 2-year Treasuries dipped below the federal funds effective rate for the first time since 2008, a move many believe suggests the central bank will not be able to continue its monetary tightening policy. The outlook for higher rates has been considered a headwind to equities in recent months.

Declining issues outnumbered advancing ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 2.28-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 13 new lows; the Nasdaq Composite recorded 6 new highs and 48 new lows.

Volume on US exchanges was 8.11 billion shares, compared to the 9.16 billion average over the last 20 trading days.