The Dow Jones Industrial Average shed more than 400 points on Monday, 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 FANG 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.
The rest of the FAANG group - Facebook Inc, Amazon.com Inc, Netflix Inc and Alphabet Inc - shed between 3 per cent and 4.8 per cent.
The Philadelphia SE Semiconductor index, which also includes some Apple suppliers, dropped 2.6 per cent, extending losses from the previous session after an underwhelming forecast from Nvidia Corp weighed on the sector.
“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.
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.
U.S. 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 U.S. demands, dampening Friday’s trade optimism that was fueled by President Donald Trump’s comments.
Canada’s main stock index also fell on Monday as marijuana producers led a drop in healthcare stocks.
At 1:30 p.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 67.12 points, or 0.44 per cent, at 15,088.38.
Seven of the index’s eleven major sectors were lower, led by declines in the healthcare sector, which fell 5.2 per cent.
Canopy Growth Corp. fell 7.8 per cent, while Aphria Inc. and Aurora Cannabis Inc. dropped 5.4 per cent and 3.6 per cent, respectively.
In a bright spot, Bombardier Inc surged 21 per cent, the most on the TSX, after the company received a contract for its double-deck trains worth $291-million.
Brent crude futures fell in choppy trade on Monday, under pressure from growing supply but supported by a reported drawdown of U.S. oil inventories, potential European Union sanctions on Iran and possible OPEC production cuts.
Brent crude was down 31 cents a barrel at $66.45, off a session low of $65.27. U.S. crude futures traded 14 cents higher at $56.60 a barrel in a session that saw swings in a $2 per barrel range.
Traders said futures pared losses when energy information provider Genscape reported that crude inventories fell in the latest week.
EU foreign ministers endorsed a French government decision to sanction Iranian nationals accused of a bomb plot in France, three diplomats said. The United States has granted waivers to some of Iran’s oil customers.
The Organization of the Petroleum Exporting Countries is pushing allied producers including Russia to join in output cuts of 1 million to 1.4 million barrels per day.
Russian Energy Minister Alexander Novak said Russia planned to sign a partnership agreement, and that details would be discussed at OPEC’s Dec. 6 meeting in Vienna. “For a cut to be successful in supporting the market, they’re going to have to present a front that is not fractured and the chance of that is looking less and less likely as Dec. 6 approaches,” said Bob Yawger, director of energy futures at Mizuho in New York.
While a large cut would support crude futures, clear signals from producers are needed, Yawger said. “We lack any certainty other than that the market is oversupplied in the U.S. and everybody else is trying to deal with it.”
Reuters