Dow Gives Back Gains—And Then Some

The Dow Jones (and other major indexes in the US stock market) took a big downturn by close of day, on Tuesday, mostly on the heels of a potential for escalation in the trade war with China.  Actually, this threat has already prompted Citigroup to slash sales projections for iPhones in the country by 50 percent; and that, of course, has a broader economic impact across several industries and could affect dozens of companies.  Fortunately, shares of Apple Inc have not changed much but in this shortened-holiday week, a Chinese shift to other smartphones could bring about even more dramatic results.  

The health and strength of Apple is important because it is actually the sixth most heavily-weighted component of the Dow Jones 30.  But Apple is also represented on the S&P 500 as well as the Nasdaq.  Should Citigroup’s estimates prove accurate, Apple’s weight could drag down the rest of the technology sector; and everyone will suffer quite significant losses. 

While all of the major US indexes pivoted down on Tuesday, the Dow Jones Industrial Average is particularly struggling. Demonstrating a lukewarm future, the Dow had initially risen as much as 132 points, that day, before giving it all back.  More importantly, the takeback continued downward to close the day down 237.92 points (or 0.9 percent) at 25,347.77.

The Standard & Poors 500—a much more broad index—also saw its large-cap stocks fall, in equal weight: down 0.8 percent to 2,802.39. Accordingly, ten out of eleven primary sectors reported declines; consumer staples fell 1.7 percent. 

Of course, we must also look at the tech-heavy Nasdaq Composite. Unfortunately, this index is also down, falling 0.4 percent to 7,607.35 in the final few hours of the trading day. 

Semiconductor companies—and tech stocks, in general—easily have the most to lose from a trade war with China.  And the Chinese territory of Taiwan is among the most active regions within the semiconductor industry. Last year, Apple admitted that there may be a problem with China after the company downgraded iPhone sales outlook across the country.  And then, in the most recent quarter, Apple reported more than $58 billion in revenue, which included $10.22 billion throughout Greater China. 

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