Wall Street on the 3rd of January witnessed a sharp lowering in the prices of the US stocks. This was in the wake of the rare sales warning that was issued by Apple Inc which has now inflamed fears.

The warning was that the slowing of the economy of China as well as the trade war of America will now eat more into the profits of the corporate and this will be much greater than what is expected.

Reasons for the decline

After Apple Inc had decreased the forecast for its revenue in the holiday quarter because of the declining sales of iPhones in China, the share prices of the company have witnessed a decline by 8.5 percent.

This was the first of the list of major warnings taking into consideration that the earning season of the United States is just round the corner.

The Wall Street has witnessed a fall in its share prices
Source: Duo

The Chief Investment Strategist as well as Senior Portfolio Manager at SlateStone Wealth LLC in New York, Mr. Robert Pavlik had stated that the worries reiterated by Apple are that the issues of the trade war of China have not been solved as yet.

He further stated that the people, particularly the investors are now worried that when a big tech name like Apple has to report a fall in its earnings then who else will get protection from a thing like that.

The stocks of Apple Inc is a part of all the three indexes of Wall Street that are major and therefore this warning which has come from it has rocked the financial markets.

The share prices of Apple Inc has declined
Source: Reuters

This is because the investors now are seeking safety when it comes to bonds as well as assets that are less risky.

Effect on other indexes

Dow e-minis had fallen by about 1.10 percent which accounts to 256 points at 8:47 am.

The S&P 500 e-minis witnessed a decline of 1.02 percent which is equivalent to 25.5 points whereas Nasdaq 100 e-minis had a fall of 1.73 percent which is equal to 110.5 points.

The slide of a big tech company like Apple Inc is actually a sad omen for the bulls of Wall Street which were hoping for an early gift this New Year after the steep selloff which took place in the December of 2018.

Chart showing the share prices of Apple Inc
Source: BBC

Despite the fact that the selloffs have made the stock cheaper the valuation of the S&P 500 has now declined from 18 times a year earlier to 14 times of the expected earnings. The estimates of the earnings have also witnessed a sharp cut.

According to IBES of Refinitiv, the analysts have stated that the average expectations of the companies on the S&P 500 have decreased their earnings per share from an earlier forecast of 10 percent which was made in the beginning of October have now decreased it to 7 percent.

This is much below from the EPS growth of 24 percent for 2018 as was expected.

Source: Money Control, Reuters