Apple and semiconductor makers led a broad sell-off in US equities on Monday, as doubts about industry growth and fears of a trade war weighed heavily on a sector that has been a driver of the long bull market.
The tech-heavy Nasdaq Composite closed down more than 3 per cent while the market benchmark S&P 500 fell 1.6 per cent, in a day of almost relentless selling that carried over into Asia trading on Tuesday.
Investors pointed the finger at the latest flare-up of tensions between the US and China at a fractious Asia Pacific Economic Cooperation summit over the weekend, as well as concerns that chipmakers in particular could get caught up in the trade war.
Fresh worries about disappointing sales for Apple’s iPhone and the latest controversy at Facebook that could lead to greater tech industry regulation added to the nervous mood.
By the end of Monday, all of the so-called Faang stocks — the fast-growing tech groups Facebook, Apple, Amazon, Netflix and Google’s parent company Alphabet — were in a bear market, meaning they had fallen at least 20 per cent from their peak.
“Trade tension has put a shock in to the market and when you get a shock, it tends to make people move away from the riskier elements,” said Nicholas Colas, co-founder of DataTrek. “Then, tech also has its own issues. The whole discussion of what does a tech business model look like has accelerated and changed in the last month.”
Shares in the world’s top three chipmakers came under added pressure after Chinese authorities on Monday said they had uncovered “massive evidence” of anti-competitive behaviour.
Beijing said a price-fixing investigation into South Korea’s Samsung Electronics and SK Hynix, and US-based Micron Technology, had made “important progress”. On Tuesday morning, Samsung fell as much as 3.6 per cent and SK Hynix lost as much as 4 per cent before paring losses. Micron fell 6.7 per cent overnight in New York.
Shares in Asia-based Apple suppliers were knocked lower on Tuesday, echoing the US sell-off. Japan Display, which provides liquid crystal display screens for iPhones, shed as much as 7.7 per cent, while Largan Precision, a camera lens-maker, fell as much as 2.5 per cent in Taiwan. Taiwan Semiconductor Manufacturing Company, a major supplier to Apple, was down by as much as 1.8 per cent.
Investors were also concerned by sparring between Xi Jinping, China’s president, and Mike Pence, US vice-president, at the Apec summit on the weekend, damping hopes of an agreement at the G20 world leaders summit in Argentina later this month.
Shares in Apple slid nearly 4 per cent after the Wall Street Journal reported that the company had slashed production orders in recent weeks for all three iPhone models launched in September. The report comes just a week after a handful of Apple’s suppliers cut their earnings guidance, and has cast further doubt over the sales outlook for the company’s flagship devices.
“Negative disposition has trickled down to Apple suppliers,” said Michael Underhill, chief investor officer at Capital Innovations.
Lumentum, for example, which makes the 3D sensors that power the facial recognition technology on the iPhones, fell a further 5 per cent, after issuing a warning over its earnings forecasts last week.
Nvidia last week also disappointed investors by reporting that the bursting of the cryptocurrency bubble had led to a glut of unsold graphics chips. It was down another 12 per cent on Monday. Advanced Micro Devices dropped 7.5 per cent.
The Philadelphia Stock Exchange semiconductor index was off 3.9 per cent. Other notable tech stock fallers were Amazon, off 5.1 per cent, and Facebook and Twitter, which were down 5.7 per cent and 5 per cent respectively.
“Investors are trying to reprice tech based on trade uncertainty and the possibility of slowing consumer spending going into 2019,” said JJ Kinahan, chief market strategist at TD Ameritrade.
Government bonds were flat, with the yield on the benchmark 10-year US Treasury at 3.06 per cent. The US dollar eased, with the DXY index down 0.3 per cent at 96.206.