NEW YORK (AP) - - Stocks went into a steep slide Thursday morning after Apple reported a slowdown in iPhone sales over the holidays in China, a hugely important market for the company.
The rare warning from Apple sent a shudder through markets and confirmed fears among investors that the world's second-largest economy was weakening.
The Dow Jones Industrial Average fell more than 600 points about an hour into trading.
Apple's stock plunged 10 percent, erasing $67 billion in value. Other big exporters including technology and machinery companies also took big losses.
Some of the worst drops went to chipmakers that make components used in smartphones and other gadgets. The trade dispute, nearly a year old, threatens to snarl their supply lines and reduce demand for their products. Tariffs and other trade sanctions could add to their difficulties.
The losses deepened after a survey of U.S. manufacturers also showed signs of weakness. The benchmark S&P 500 index was down 2.4 percent as of 10:45 a.m.
In a letter to shareholders on Wednesday, Apple CEO Tim Cook said iPhone demand was waning in China and would hurt revenue for the October-December quarter. Cook said Apple expects revenue of $84 billion for the quarter. That's $7 billion less than analysts expected, according to FactSet.
Apple's warning, its first since 2002, deepened concerns about the Chinese economy, which had been showing signs of stress.
The S&P 500 dropped 60 points to 2,449. The Dow slid 642, or 2.7 percent to 22,707. The Nasdaq composite, which has a high concentration of tech stocks, retreated 185 points, or 2.8 percent, to 6,482.
"For a while now there's been an adage in the markets that as long as Apple was doing fine, everyone else would be OK," said Neil Wilson, chief markets analyst at Markets.com. "Therefore, Apple's rare profit warning is a red flag for market watchers. The question is to what extent this is more Apple-specific?"
Apple's warning couldn't have come at a worse time for stock market investors given the wipeout in late 2018, when many global indexes posted their worst performances in a decade amid concerns about the global economy and the prospect of further U.S. interest rate hikes.
A weak report on U.S. manufacturing was also weighing on the market. The Institute for Supply Management said its index of manufacturing fell to its lowest level in two years, and new orders have fallen sharply since November. Manufacturing is still growing, but at a slower pace than it has recently.
In times of market stress and volatility, there are some assets that traditionally do well as investors perceive them as safer to hold. U.S. government bond prices, gold and high-dividend stocks like utilities all rose.
Apple stock has slumped 38 percent since early October as investors feared a sales slowdown in China. The company also recently announced that it would stop disclosing how many iPhones it sold each quarter, and many investors felt that suggested the company was trying to hide signs that its sales were cooling off. Its stock fell to $143.58.
Other major tech companies have also taken huge losses over the last three months as the market endured its worst slump in almost a decade. While stocks rebounded slightly at the end of 2018, Apple's troubles added to their losses Thursday. Microsoft shed 1.6 percent to $99.46. In the chip industry, Intel fell 4.1 percent to $45.17 and Qualcomm lost 2.4 percent to $56.04 while Skyworks skidded 7.6 percent to $62.77.
Among big industrial companies, Caterpillar gave up 3.5 percent to $121.90 and Deere lost 2.5 percent to $144.93. Companies that make heavy machines like construction equipment are facing less demand as China's economy, the largest in the world after the U.S., loses strength. They're also dealing with higher costs for metals as a result of import taxes.
Bonds prices jumped. The yield on the 10-year Treasury note fell to 2.58 percent from 2.66 percent late Wednesday, a large move.
Markets overseas held up a bit better. Germany's DAX and the French CAC 40 both fell 1.2 percent, and Britain's FTSE 100 dipped 0.2 percent. In Asia, tech-related stocks suffered most. South Korea's Kospi ended 0.8 percent lower and Hong Kong's Hang Seng gave up 0.3 percent.
Oil prices were little changed. U.S. crude stayed at $46.52 a barrel in New York and Brent crude rose 0.4 percent to $55.13 a barrel in London. Oil prices have nosedived almost 40 percent since early October, and investors' fears about falling demand in China and elsewhere were a key reason for the decline.
The dollar weakened. It fell to 107.46 yen from 109.21 yen. The euro rose to $1.1403 from $1.344. The British pound fell to $1.2596 from $1.2690.
Gold also rose, by 0.6 percent to $1,291 an ounce.
Some experts believe that the market volatility could eventually lead to changes in the policies that are concerning investors. The Fed, for example, could slow the pace of its interest rate increases if markets continue to drop. And U.S. President Donald Trump could become more open to settling the trade dispute with China.
"It is a well-known fact that Trump perceives the markets as a true barometer of his presidency," said Piotr Matys, a strategist at Rabobank International.
Pan Pylas contributed to this story from London.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP