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. (Reuters) - U.S. stock index futures tumbled on Thursday after Apple Inc (AAPL.O) stunned investors with a rare sales warning that inflamed fears that the Sino-U.S. trade war and a slowing China economy would eat into corporate profits more than expected. The Dow Jones Industrial Average plunged as much as 677 points about an hour into trading, then began climbing back, but was still down more than 550 points at midafternoon. Analysts on average expect S&P 500 companies to increase their earnings per share by nearly 7 percent this year, down from a forecast of 10 percent at the start of October and far below their expectations of 24 percent EPS growth for 2018, according to Refinitiv’s IBES. Apple stock plummeted 9.5 per cent, erasing $71 billion in value. Other big exporters, including technology and heavy-machinery companies, also took big losses. Some of the worst drops were at chipmakers that make components used in smartphones and other gadgets. The U.S.-China trade dispute, nearly a year old, threatens to snarl their supply lines and reduce demand for their products. Apple's warning, its first since 2002, deepened concerns about the Chinese economy, which had been showing signs of stress. 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. S&P 500 e-minis ESc1 were down 34.25 points, or 1.36 percent and Nasdaq 100 e-minis NQc1 were down 134 points, or 2.1 percent. The Dow had slid 571 points, or 2.5 per cent, to 22,774. The Nasdaq composite, which has a high concentration of tech stocks, retreated 185 points, or 2.8 percent, to 6,482. “This provides solid evidence of how slowing economic growth and a trade war make the best death cocktail for sentiment,” said Naeem Aslam, chief market analyst at Think Markets UK Ltd in London. "Therefore, Apple's rare profit warning is a red flag for market watchers. The question is to what extent this is more Apple-specific.”

Investors were also unsettled by a report Thursday that showed signs of weakness in U.S. manufacturing. 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. The report comes ahead of the more comprehensive nonfarm payrolls report on Friday. ET, the Institute of Supply Management is expected to report its index of national factory activity fell to a reading of 57.9 in December from 59.3 in November. Even discounting those numbers by 50% still has China growing, though clearly not enough for a developing economy of that size. U.S. government bond prices jumped, sending yields to their lowest level in almost a year, and gold and high-dividend stocks like utilities also rose as investors looked for safer places to put their money. 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. Microsoft shed 3.1 per cent to $97.95. 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 3.2 per cent to $122.35, and Deere lost 2.1 per cent to $145.03. Companies that make heavy machinery such as construction equipment are facing less demand as China's economy, the largest in the world after the U.S., loses strength. With tax cut stimulus wearing thin, capital costs rising, and import costs going up, China is one of the biggest headwinds to the U.S. stock market. Markets overseas held up a bit better. Germany’s DAX dropped 1.5 per cent and the French CAC 40 fell 1.7 per cent, and Britain’s FTSE 100 gave up 0.6 per cent. In Asia, tech-related stocks suffered most. South Korea’s Kospi ended 0.8 per cent lower and Hong Kong’s Hang Seng gave up 0.3 per cent. Oil prices were little changed. U.S. crude rose 0.4 per cent to $46.71 a barrel in New York and Brent crude rose 1.1 per cent to $55.50 a barrel in London. Oil prices have nosedived almost 40 per cent 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. Copper, which is used in construction and wiring, fell 2.1 per cent to $2.57 a pound. Gold also rose, by 0.6 percent to $1,291 an ounce. President Donald Trump said on Wednesday the talks were going “very well” and that the stock market would rise once various trade deals are settled. Pan Pylas contributed to this story from London. AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP

The Associated Press contributed to this report.
The Dow Jones Industrial Average drops 660 points following a warning from Apple on weak demand and trade relations between the United States and China.