Monday has been a rough day for Apple shares and U.S. stock markets as a whole.
The technology giant has lost more than 4% in midday trading as U.S. equities markets are taking a massive hit today thanks to increased fears over the global coronavirus outbreak.
The Dow Jones Industrial Average was down nearly 1,000 points by lunchtime as the S&P 500 and Nasdaq Composite also were both down more than 3% in the midday session.
For Apple Inc. (Nasdaq: AAPL), the drop comes a week after it announced it would not likely meet its next quarterly guidance for sales due to the outbreak.
What’s Happening to Apple?
Apple said its iPhone supply is dropping and demand for its products in China is following suit.
In the last 12 days, Apple shares have dropped more than 8% as supply issues from its Chinese manufacturers and demand problems have taken a toll.
Because its supply chain relies so heavily on Asian countries, Apple shares will continue to tumble so long as the coronavirus takes hold.
“There is some comeuppance due, and unfortunately I think the coronavirus is the exogenous variable that is a catalyst to take some of these stocks down,” Independent Solutions Wealth Management portfolio manager Paul Meeks told CNBC’s “Trading Nation” last week.
Buy or Sell?
Last week, analysts varied in their ratings of Apple stock. Credit Suisse Group put the Cupertino, California, company at a “neutral” while Deutsche Bank and Sanford C. Bernstein rated the company as a “sell.” Still, many others consider the dip to be the perfect time to buy.
“I’d be buying with both hands,” Meek said.
Apple said the biggest reason for withdrawing guidance was because of slumping demand for its products in China and a lower supply of its massively popular iPhone. That also pushed semiconductor companies that supply Apple with microchips lower.
“I’m most bullish on the semiconductor and semiconductor capital equipment companies,” Meek said. “You’ve had some companies that have already reported their results. So, we have some clean and fresh data.”
The biggest concern is that it’s still unknown just how much the coronavirus will impact global markets — or how long that impact will last.
What’s Next?
For nearly a month, Wall Street analysts have underplayed the impact the coronavirus has on markets.
However, the latest news of accelerated outbreaks globally proves the virus is not contained and predicting how far it will spread remains difficult.
Because China is such a huge player in the global economy, the lasting impacts of the coronavirus will be felt on a much larger scale than that of the SARS epidemic in 2003.
Look for Apple shares and those of its suppliers to continue a downward trajectory until all elements of the virus have been contained.
