U.S. stocks tumble, treasuries rally on Apple, ISM

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(Jan 4): U.S. stocks plunged after a factory gauge fell the most since the recession and Apple cut its sales outlook, adding to concern that global growth is slowing. Treasuries rallied and the yen strengthened.

The S&P 500 fell more than 2%, the Dow Jones Industrial Average sank more than 600 points and 10-year Treasury yields tumbled to an 11-month low, after a gauge of U.S. manufacturing plunged last month by the most since October 2008. Stocks were already under pressure after the iPhone maker plunged the most since 2013 after citing an unforeseen slowdown in China for the sales miss. A boost from Bristol-Myers Squibb’s bid to buy Celgene and a strong reading on private hiring for December faded.

“Corporate America is getting cold feet about the outlook,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. “That’s what the stock market is saying with new selling and new lows after the manufacturing survey’s release today.’

Here are the major stocks moves:

Apple plunged more than 10%. All 30 chipmakers in the Philadelphia Semi index fell, with Qorvo, Skyworks and Broadcom off at least 4.5%. 3M, Caterpillar and DowDuPont dropped at least 3%. Bristol-Myers plunged 12%, while Celgene jumped 28%. Carmakers reported monthly sales; GM and Ford both retreated. 

Airlines tumbled after Delta cut its revenue forecast. American was off 9.5%.

In currency markets, the yen jumped and the Australian dollar slumped to the lowest in almost 10 years, as algorithmic programs amplified sharp gyrations amid thin liquidity during a Japanese holiday. Bloomberg’s dollar index fell.

The weak ISM factory reading adds to anxiety spurred by poor data from China and Europe a day earlier, stoking fear that a recession looms larger than previously thought. Apple and Delta join a growing list of companies warning that the trade war and political turmoil may be weighing on corporate profits. Dysfunction in Washington continues, meanwhile, with leaders unable to strike a deal to end a partial shutdown of the federal government.

“That Tim Cook and his company mentioned China as the reason behind the downturn in the company’s outlook seemed to hit exactly the pressure point traders and investors were already alarmed over,” Greg McKenna, markets strategist at McKenna Macro and a three-decade foreign-exchange market veteran, wrote in a note to clients. “That is, the China and global slowdown which seems to have been confirmed by Wednesday’s global manufacturing PMI data.”

Here are some events investors may focus on in coming days:

The U.S. December jobs report is due Friday Fed Chair Powell is interviewed with predecessors Janet Yellen and Ben Bernanke at the annual meeting of the American Economic Association Friday. Atlanta Fed President Raphael Bostic joins a panel on long-run macroeconomic performance.

And these are the main moves in markets:

Stocks

The S&P 500 fell 2.4% at 10:50 a.m. in New York. The Nasdaq 100 retreated 2.3%, while the Dow Jones Industrial Average slid 461 points. The Stoxx Europe 600 Index lost 0.4% to the lowest in a week. Germany’s DAX Index sank 0.8%, reaching the lowest in a week on the first retreat in a week. The MSCI Emerging Market Index declined 0.4% to the lowest in more than a week. The MSCI Asia Pacific Index climbed 0.2%.

Currencies

The Bloomberg Dollar Spot Index dipped 0.3%. The euro advanced 0.2% to US$1.1366. The British pound dipped 0.2% to US$1.2585, the weakest in almost three weeks. The Japanese yen jumped 1% to 107.828 per dollar, the strongest in more than eight months on the biggest increase in two weeks.

Bonds

The yield on 10-year Treasuries climbed two basis points to 2.64%. The two-year Treasury yield added three basis points to 2.49%. Germany’s 10-year yield jumped one basis point to 0.18%, the biggest surge in almost two weeks. Italy’s 10-year yield climbed 17 basis points to 2.861%, the highest in more than two weeks on the biggest surge in almost 14 weeks.

Commodities

West Texas Intermediate crude climbed 1.6% to US$47.27 a barrel, the highest in more than two weeks. Gold futures advanced 0.5% to US$1,290.20 an ounce, reaching the highest in almost seven months on its sixth consecutive advance.