Stocks tumble after Apple's warning leave investors jittery

/ CBS/AP

Apple warns investors on 1st quarter revenue

Shares suffered another sharp decline after Apple cut its revenue forecast, blaming lackluster sales in China during the holiday quarter.

The Dow dropped 335 points, or 1.4 percent, to 23,011 in early trading. The tech-heavy Nasdaq also shed 1.4 percent, while the S&P 500 slipped 0.7 percent.

Apple shares tumbled 9 percent.

In a letter released to shareholders after the close of trading on Wednesday, Apple CEO Tim Cook slashed the tech giant's revenue forecasts for the October-December quarter, blaming a slowdown in sales of iPhones and other Apple devices in China. The disclosure was a "a bombshell negative pre-announcement" that pointed to far bigger problems at the tech company than many investors had feared, noted Wedbush analyst Dan Ives in a research note.

"Although the company had some quarters over the past 20 years that missed Street expectations, in the modern iPhone era last night was clearly Apple's darkest day in our opinion and represents a challenging growth period ahead for the company (and its investors)," Ives wrote.

The tech giant said revenue for its fiscal first quarter, which ended Dec. 29, will be about $84 billion, falling short of an average analyst estimate of $91.5 billion. Apple shares slid 7.2 percent in after-hours trading as investors digested the revenue warning, a rarity from a tech giant that until recently has been a Wall Street favorite.

The official results will be released on Jan. 29.

China's issues

Cook attributed most of the revenue drop to China, where the economy has been slowing and where U.S. tariffs have been raised on more than $200 billion in goods, although the iPhone hasn't been affected directly so far. The company's shares fell 7.6 percent to $146 in after-hours trading. Cook's letter added to worries about slowing growth in the world's second largest economy.

"Doubling down on Asia markets for a second day today would be the latest downward revision in Q1 guidance from tech giant, Apple," Jingyi Pan of IG said in a market commentary. "The already shaky foundation for Apple owing to the likelihood of the company's products being enlisted into the tariffs scuffle saw their latest move to lower revenue outlook packing a punch for share prices."

Worst December

So far, 2019 hasn't had an auspicious start for investors. The Dow eked out a small gain on Wednesday, the first trading day of the year, after a volatile session, followed by Thursday's sharp decline.

That comes on the heels of a tough December, with Bank of America Merrill Lynch noting that the S&P 500 "posted its worst monthly total return since the financial crisis," with a decline of 9 percent.

"And 2018 marked the first negative total return year for the S&P since the financial crisis (-4.4 percent), ending the nine consecutive years of positive returns which tied the longest streak in history since 1936 (1991-99)," the investment firm noted in a research note.

First published on January 3, 2019

© 2019 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

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