Dow Reverses 100-Point Gain as Trade War Ravages iPhone Sales

Journalist:
Sam Bourgi @hsbourgi
May 28, 2019

By CCN: The Dow and broader U.S. stock market finished sharply lower on Tuesday, as the threat of a trade-war escalation with China prompted Citigroup to slash its iPhone sales projections by half. Shares of Apple Inc. (AAPL) were little changed at the start of the holiday-shortened week, but that could soon change if Chinese residents shift their smartphone preferences.

Dow Rally Vanishes; S&P 500, Nasdaq Follow

All of Wall Street’s major indexes pivoted lower Tuesday afternoon, which reflected a tepid pre-market for Dow futures. The Dow Jones Industrial Average initially rose by as much as 132 points before giving back gains later in the session. It would settle down 237.92 points, or 0.9% at 25,347.77.

Dow Jones Industrial Average walks back triple-digit gains at the start of the holiday-shortened week. | Source: Yahoo Finance.

The broad S&P 500 Index of large-cap stocks declined 0.8% to 2,802.39. Ten of 11 primary sectors reported declines, with consumer staples falling 1.7%.

The technology-focused Nasdaq Composite Index pivoted lower in the final hours of trading, falling 0.4% to 7,607.35.

Trade War Will Ravage iPhone Sales

U.S.-China trade war could ravage iPhone sales, according to Citigroup. | Source: REUTERS / Dado Ruvic

The ongoing trade war between the United States and China could have adverse effects on Apple. Analysts at Citigroup believe iPhone sales “could be cut in half” should Chinese consumers shift their purchasing preference to domestic brands.

“We are proactively slashing our iPhone unit sales as we believe the US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China national brands,” Citi said, according to CNN.

Apple ranks as the sixth most heavily-weighted component in the Dow 30. It is also represented on the S&P 500 Index, and – further still – it trades on the Nasdaq. If Citigroup’s estimates are proven accurate, the technology sector as a whole could suffer significant losses as a result of the trade war.

Tech stocks in general and semiconductor companies, in particular, have the most to lose from a trade war. The Chinese territory of Taiwan is one of the most active regions for the semiconductor industry.

On Monday, President Trump said his administration isn’t ready to make a new deal with China, highlighting the fractious state of the current negotiations.

“I think they probably wish they made the deal that they had on the table before they tried to renegotiate it,” Trump said Monday at a joint press conference with Japanese Prime Minister Shinzo Abe in Tokyo.

Apple admitted last year that it might have a China problem after the company downgraded its outlook on iPhone sales in the country. In its most recent quarter, Apple reported $58.02 billion in revenue, including $10.22 billion for Greater China.

Click here for a real-time Dow Jones Industrial Average (DJIA) price chart.

This article was edited by Josiah Wilmoth.

Last modified (UTC): May 28, 2019 16:10

Sam Bourgi @hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com