Tariff victim Apple leads US sharemarket lower

Tariff-hit technology stocks weighed on Wall Street as investors continued to show caution over US-China trade developments.

In China, the sharemarket benchmark closed at its lowest level since the 2014 slump as the US planned new tariffs on $US200 billion in Chinese goods.

So far, Wall Street has managed to hold its ground and remain near all-time highs, in part because trade issues have been incremental and the economic impact has so far been minimal.

But cracks are beginning to show, with shares of Apple, the world’s most valuable company, dropping 2.7%.

Apple’s sales are threatened by the tariffs and China’s retaliatory measures could target iPhone production there.

Poor timing
The timing of the latest tariff moves is especially bad for Apple, which this week starts shipping two of its three new iPhones and a new smartwatch.

Christmas shopping helps deliver about a third of Apple’s annual revenue. A tariff of 10% would add more than $US11 to the import cost of about $115 for a Chinese-made Apple Watch Series 3.

“Apple’s profit margins are very healthy, so Apple can withstand these tariffs better than most,” IHS Markit. analyst Wayne Lam says. Still, he adds that absorbing the costs of the tariffs will reduce gross margins on smartwatches, which are now more than 40%.

Apple chief executive Tim Cook has previously urged President Donald Trump to avoid a trade battle, saying it would hurt US companies. He also says tariffs are a tax on consumers. 

The other trillion-dollar tech behemoth, Amazon.com, slid 3.1% after confirming a Wall Street Journal report that it was investigating suspected data leaks and bribes of employees.

Twitter shed 3.8% when an analyst at MoffettNathanson lowered a price target.

Wall Street falls
The Dow Jones Industrial Average closed down 92.55 points, or 0.35%, at 26,062.12. The S&P 500 was down 0.6% at 2888.80 and the Nasdaq Composite dropped 1.4% to 7895.79.

In the bond market, the yield on the benchmark 10-year US treasury note rose briefly above 3% before falling to 2.990% from 2.992% on Friday. The highest yield for the year is 3.109%, reached on May 17. Yields rise as bond prices fall.

In commodities, oil prices advanced on the back of a weaker dollar and continued expectations of a global supply crunch. US crude for October delivery rose 0.8% to $US69.54 a barrel while Brent, the global benchmark, gained 0.9% to $US78.81 a barrel.

Elsewhere, the Stoxx Europe 600 swung between small gains and losses to finish up 0.1%. Germany’s DAX eased 0.2%, France’s CAC 40 shed 0.07% and the UK’s FTSE 100 slipped 0.03%.

Italy’s FTSE MIB Index rose 1.1% as investors bet the country’s upcoming budget wouldn’t set it on a collision course with the EU.

The latest trade worries continue to hurt Asian stocks. The Shanghai Composite slumped 1.1% to its lowest level since November 2014 and Hong Kong’s Hang Seng dropped 1.3%. Japan was closed for a holiday.