The Nasdaq is down 178.66 points, or 2.68%, at 6,487.28. Photo: Bloomberg
Bengaluru: The Dow Jones Industrial Average fell more than 600 points on Thursday as the biggest drop in more than a decade in the ISM US manufacturing index added to nerves over slowing global growth sparked by a revenue warning from Apple.
At 10.38am EDT, the Dow Jones Industrial Average was down 631.40 points, or 2.70%, at 22,714.84, the S&P 500 was down 57.58 points, or 2.29%, at 2,452.45 and the Nasdaq Composite was down 178.66 points, or 2.68%, at 6,487.28.
Apple’s shares slumped 9.2% after the company slashed its holiday-quarter revenue forecast saying sales in China slowed more than expected, the first major warning with the US earnings season around the corner.
Meanwhile, Institute of Supply Management data showed US manufacturing activity slowed more than expected in December, with the index of national factory activity dropping to 54.1 last month and missing economists’ estimate of 57.9.
That comes after data earlier this week showed a deceleration in factory activity in China and the euro zone, indicating the ongoing US-China trade dispute was taking a toll on global manufacturing.
“We are seeing markets extrapolate Apple’s news throughout several sectors and equate it to a deceleration in the global economy,” said Christopher Anselmo, director at Nasdaq IR Intelligence in New York City.
“A lot of data in the past few days, including US factory activity is pointing to a global economic slowdown. The data is just giving a magnitude of how broad this slowdown is and which regions it is affecting the most.”
The grim reading rocked financial markets, sending investors to the relative safety of government Treasuries and bond-proxies stock sectors. Even among them only real estate gained, while utilities and consumer staples nursed slight losses.
While the recent selloff has made stocks cheaper, with the S&P 500’s valuation falling to 14 times expected earnings from 18 times a year earlier, earnings estimates have also been cut sharply.
Analysts on average expect earnings per share at S&P 500 companies to rise nearly 7% this year, down from a 10% forecast at the start of October and far below their expectations of 24% EPS growth for 2018, according to Refinitiv’s IBES.
“As we head towards the earnings season, investors are getting more and more concerned about how the global economic slowdown and the trade war are impacting US companies,” said Anselmo.
Among the few bright spots was Celgene Corp, which surged 25.8% after Bristol-Myers Squibb Co offered to buy the drugmaker for about $74 billion in cash and stock. Bristol-Myers fell 12.5%.
Earlier the market got a short-lived boost from an ADP National Employment Report that showed US private sector jobs rose far more than expected in December. The more comprehensive nonfarm payroll report on Friday will give a clearer picture of labor market strength.
Declining issues outnumbered advancers for a 2.14-to-1 ratio on the NYSE and a 2.54-to-1 ratio on the Nasdaq.